***Smart Financial Weekly Mortgage Update October 9, 2009***
Interest Rates
The historic rate train just keeps chugging along as rates were essentially flat for the week. However, on Thursday night Fed Chairman Bernake made remarks that suggested the Fed was closer than previously thought to raising short term interest rates. This led to higher Treasury yields Friday and a slight increase in mortgage rates. The last time the Federal Reserve raised short term interest rates was June 2006! During the week Australia became the first major economy to raise its interest rates. The country has a 5.8% unemployment rate and its economy is doing fairly well compared to many others.
When Rate
This Week 4.87
1 Month Ago 5.08
1 Year Ago 5.94
2 Years Ago 6.40
Note that actual market rates vary geographically and by lender, credit score and Loan to Value.
Source: Federal Reserve Statistical H.15.
Mortgage Industry Update
• Representative Scott Garrett of New Jersey introduced HR 3706 which raises the FHA minimum down payment from 3.5 % to 5% AND eliminates financing closing costs. Fed Chairman Bernake supports the legislation.
• Fannie Mae and Freddie Mac are prepared to introduce a program to help independent mortgage bankers acquire short term credit. This is good news as it will allow more competition for mortgages.
Good News
• The ISM Services Index expanded for the first time since September 2008 to 50.9 up from August’s 48.4. Anything over 50 indicates expansion in the service sector.
• Retailers on E-Bay saw sales increase in August and September which were the first increases since July 2008.
• Wholesale inventories fell 1.3% in August which was the 12th consecutive monthly decline and below the 1.0% that was forecast.
• Retail sales rose for the first time in 13 months in September by 1.1%.
Statistics of Interest/Concern
• 61% of the Mortgage Backed Securities (MBS) between 2005 and 2007 that were rated AAA by Standard & Poor’s have been downgraded to BBB or lower.
• Total U.S. consumer debt fell by $11.98 Billion in August much more than was expected according to the Federal Reserve. This was the seventh consecutive month of declining consumer debt.
• U.S. office vacancy rose to five year high of 16.5% said REIS Inc. a property research firm.
Foreclosure Headlines
• According to the Center for Responsible Lending there are 6600 foreclosure filings per day. I did the math and that’s 2.4 million foreclosures in a year.
Job Market Headlines
• Initial weekly jobless claims came in at 521,000 which is the lowest since January and was below expectations of 540,000.
• Continuing jobless claims were 6.04 million down 72,000 from the previous week.
• The four week moving average of weekly claims was 539,750 down slightly from the previous week.
• 1.4 million is still the forecast number of people who will lose their unemployment benefits by the end of 2009 unless emergency legislation extending benefits is passed.
• 26% of employers who have laid off employees in the past year reported they are planning on bringing some workers back according to a Career Builder/USA survey.
Commentary/Observations
The UN Development Program announced its annual Human Development Index (best countries to live in) and the winner was Norway. Australia was second and the U.S. came in 13th. Niger on the African continent finished last at 182nd.
As of September 30th in California more than 300 hotels were in foreclosure or in default on their loans. This is a fivefold increase since January.
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