Mike’s Real Estate Show

This is from my friend Ardythe Brandon of CTX Mortgage. She writes a newsletter with some good insights. Thought you folks might find it interesting. CTX Mortgage is very BIG on New Homes and Construction Loans for all you folks pondering building your dream home. Give her a shout. She’s very sharp!!  

“START ME UP…IF YOU START ME UP I’LL NEVER STOP” (Rolling Stones) And the New Year sure “started up” at double speed, but the action was destined to make more than a few grown men cry before the week was out. Bond pricing had improved throughout the holiday shortened trading week, and the stage was set for the high impact Jobs Report to be unleashed on Friday. But some interesting moves were going on behind the scenes on Thursday afternoon…here’s what happened.

Late in the day on Thursday, economists reduced their official estimate for Friday’s Jobs Report number from 115,000 to 100,000, clearly indicating much lowered expectations in new job growth. This was largely based on ADP - the nation’s largest payroll processor - coming out earlier in the week saying that their numbers indicated net job losses for the previous month, no gains at all! Additionally, the Fed Meeting Minutes showed the Fed believes that US job growth is cooling. So…when Bond traders saw the late change in analysts formal expectations, they gobbled up even more Bonds ahead of the Jobs Report - figuring that the number would likely come in low, Bond prices would rally, and home loan rates would improve.

But this was not to be. When the actual numbers from the Jobs Report hit, Traders were stunned to see an unexpectedly high December Jobs number of 167,000, with the Unemployment Rate holding steady at a very low 4.5%. Additionally, the Average Hourly Earnings in December shot 8 cents higher or 0.5%, far ahead of the 0.3% rise expected. This brings the average US hourly rate of pay to just over $17. And a deeper look at the hourly earnings figure showed year over year wages increased by 4.2%, which is the highest in four years!

Traders quickly realized they were positioned on the wrong side of the market and began to sell, sparking a move lower in Bond pricing, and giving back some of the gains made previously in the week. But after the smoke cleared, Bonds still ended up on the plus side for the week overall, with home loan rates improving by about .125% across the board.

JUST LIKE THE PROGRAMMING OF VCR’S IN YEARS PAST…THE YOUNGER GENERATION IS BYPASSING MANY OF US WITH THEIR NEW LINGO AND ABBREVIATIONS NOW FOUND EVERYWHERE, IN EMAILS, TEXT MESSAGES, INSTANT MESSENGER, MESSAGE BOARDS. AND IF YOU AREN’T ON BOARD WITH TSL (TEXTING AS A SECOND LANGUAGE), YOU MIGHT BE SOL (SORELY OUT OF LUCK). SO IF YOU’RE TRYING TO COMMUNICATE WITH SPEED AND EASE IN TODAY’S TECH-SAVVY WORLD, READ THIS WEEK’S MORTGAGE MARKET VIEW…AND BECOME PART OF THE ABBREVIATION NATION.
 
Forecast for the Week 
 
So…will the action cool down in the coming week, or will the wild ride continue for Bonds and home loan rates? In terms of economic news, the week ahead will be fairly slow, until Friday’s potentially high impact Retail Sales Report. And whenever the market lacks economic reports and data to trade on, technical indicators like historic highs, lows and trendlines will generally take center stage.

And the technicals are on our side, in terms of seeing Bond pricing and home loan rates stabilizing, and perhaps even seeing more improvement in the coming days. Take a look at the chart below, which shows how Bonds have used the 50-day Moving Average (which is basically the average of where Bond pricing has been for the past 50 days) as a floor of support. This 50-day Moving Average is rising underneath Bonds feet, helping pricing move higher, meaning home loan rates move lower. And even after Friday’s decline, Bonds clawed their way back above the 50-day Moving Average…and if they can hold their ground during the coming week, the improving trend appears to be good news for Bonds and home loan rates.

Bottom line: in the absence of any surprises during the week, Bond pricing and home loan rates should stabilize and perhaps improve slightly, due to the positive technical picture currently in place.
 Ardythe Brandon
Director of Operation  
  
  3700 Old Redwood Hwy., Suite 100
Santa Rosa CA 95403
(707) 573-8129 245 - phone
(866) 656-8129 - toll free
(707) 479-0092 - mobile
(707) 573-8398 - fax
ardythe.brandon@ctxmort.com