M MORTGAGE MATTERS... M ● Week of October 11, 2010 cent spat of discouraging economic news. We also remain en- Keeping Market Comment couraged because of the trend toward localization, meaning Las Are we progressing, regressing or standing still? It's hard to Vegas, Phoenix, Miami, and other desultory burgs are no longer up-to-date tell, given the litany of often-contradictory economic news over capable of infesting the rest of the country with their dire out- the past few weeks. What's more, this week's releases offer looks. on market little in the way of elucidation. fluctuations Mortgage rates are another story, adhering mostly to a national We were pleased to see that the pending home sales index for trend. That trend, as we all know, remains down. Indeed, this allows you August beat analyst expectations, rising 4 percent to 82.3 from past week most of the mortgage products shed at least a few July's 78.9 posting. When we dug a little deeper, we were fur- basis points on concerns the economic recovery has stalled and to bring ther pleased to find faster-than-expected gains in those markets that the Federal Reserve will have to inject more money into the that popped the loudest – easterly sections of California, Ari- economy (euphemistically known as “quantitative easing”) by greater zona, and Las Vegas – when the real estate bubble burst nearly purchasing more mortgage-backed securities. two years ago. value to More quantitative easing will likely occur after Friday's em- your The obvious question is will the sales trend hold and will it be ployment report, which showed that the private sector added able to sustain the housing-price gains we've seen this year? only 64,000 jobs in September while the total workforce shrank clients. We think so, though others disagree. According to real estate by 95,000 jobs (mostly due to the federal government letting go data provider Clear Capital, national home prices actually temporary census workers). Meanwhile, the unemployment rate ● dropped 0.2 percent over the three months ending in September. held at 9.6 percent. Many market watchers believe this is only the beginning and that prices will continue to drop well into 2011. In short, expect today's low mortgage rates to hold into the near future. But keep in mind, rate drops have been realized in sin- We remain encouraged, nonetheless, knowing that national gle-digit basis-point increments; increases, when they come, prices are 10 percent above their 2009 lows and continue to will likely be another story. make some headway despite the tax-credit expirations and re- Economic Release Consensus Analysis Indicator Date and Time Estimate Federal Reserve Tues., Oct. 12, Important. Fed watchers are expecting a downgrade in the eco- None nomic outlook FOMC Minutes 2:00 pm Mortgage Wed., Oct. 13, Important. Purchase activity could slip after the new FHA FICO- None score requirements. Applications 7:00 am, et Producer Thurs., Oct. 14, All Goods: 0.1%(Increase) Important. Higher energy and commodity prices are being offset Price Index 8:30 am, et Core: 0.1% (Increase) by falling prices in other business sectors. Consumer Fri., Oct. 15, All Goods: 0.1%(Increase) Important. Constrained pricing will help maintain a low interest- Price Index 8:30 am, et Core: 0.2% (Increase) rate environment. Retail Sales Fri., Oct. 15, 0.3% Important. Continued spending buttresses the argument that there (September) 8:30 am, et (Increase) will be no double-dip recession. The Downside to Low Interest Rates with their one-size-fits-all regimes – will continue to rule the Many mortgage brokers and bankers remain enthusiastic over roost until we achieve a more normalized interest-rate environ- the low (and possibly lower) mortgage-rate environment. We ment, where rates genuinely reflect market risk. The upside to a prefer to restrain our enthusiasm; low mortgage rates have long normalized market includes a greater variety of loan products ceased to be the stimulus they were earlier in the crisis. Actu- and greater latitude in underwriting standards, thus making for a ally, low rates are doing more harm than good these days. more diverse and accommodating market. The fact is that interest rates are artificially low and are hinder- Rising interest rates would also put an end to the carry-trade ing private investment, which there is a sorry dearth of these game, where banks can simply make money borrowing at short- days. Freddie Mac and Fannie Mae continue to fill the void, term rates will simultaneously lending at higher rates to the US which means everyone must adhere to their inflexible under- Treasury. Once this game is curtailed, more lenders would turn writing standards. to underwriting riskier loans; thus creating a more sweeping and inclusive market. If today's market is in need of anything, it's Unfortunately, it appears that Freddie Mac and Fannie Mae – more sweep and more inclusiveness. This newsletter brought to you compliments of: Picore Team Michael Picore 970-947-9295 Kristi Picore 931 Grand Ave, Glenwood Springs, CO 81601 970-384-4486 This Newsletter is for informational purposes only. The information contained herein may not be applicable to every situation or jurisdiction and we urge you to consult your professional advisor prior to acting on information contained herein. The content, accuracy and opinions expressed herein are not verified or endorsed by the sponsor hereof.