Thoughts about the mortgage and real estate industries and the challenges we face and some possible solutions. I'm always happy to hear your ideas, so please feel free to share your ideas for all the readers to see.
Happy Tuesday - the benchmark bond started the day down more than it was up yesterday but that trend reversed when the three pieces of data that were released all came in worse than expected: 1) Case-Schiller Home Price Index came in at 6.7 vs. expectations of 7.5 and previous of 8.1, 2) Chicago Purchasing Manager's Index came in at 60.5 vs. expectations of 61.9 and previous of 64.3, and 3) Consumer Confidence came in at 86 vs. expectations of 92.5 and previous of 92.4. None of these will move the benchmark bond a whole lot but they did help to get it off the lows. As I write this it is currently down 7 basis points for the day. Here is the chart (the bond moved down a bit after I took this picture):
My thoughts on where we are headed from here: The benchmark bond is testing some fairly strong resistance levels after a nice run-up over the last several days. Additionally, the market is overbought so there is a good chance we could see some sell-off. Barring some really dour reports on jobless claims on Thursday and the employment report on Friday, look for the benchmark bond to sell off and rates to move hire. I recommend locking before the close of business on Wednesday - you could get a pleasant surprise on Thursday or Friday but I wouldn't count on it.
Personal note: I will be out of town on Thursday and Friday with no access to the internet so there will be no report on the jobless claims or employment data until next week.
Not much happening in the mortgage bond market this morning with little news on the economic front - the Richmond Fed Manufacturing Index came in at 14 vs. expectations of 12, this isn't a market mover. We are seeing a bit of follow through from yesterday; the benchmark bond was up 17 on the day at its highest so far and is currently up 9 basis points. The key thing to watch is where the benchmark bond closes; it is currently 3 basis points above the 1st level of resistance and if it closes above this resistance level, it could be a sign that investors might have confidence to push it even higher with rates moving lower as a result. Here is the current chart:
Economic News on the docket: Tomorrow we have new home sales numbers which typically isn't a rate mover but a solid number could have a negative impact. Thursday we will get the initial and continuing jobless claims and these are the most closely watched numbers of the week (except for the first Friday of the month which brings the employment report) and could impact rates one way or another if there is a surprise. Also on Thursday are the Durable Goods Orders which gives us a look into what consumers are doing relative to buying big ticket items. We finish off the week with GDP and Michigan's Consumer Sentiment Index.
Please feel free to share your thoughts as well as like and share this post. Please also subscribe so that you will get updates as I post them. I am licensed to provide mortgages in California, Nevada and Utah so feel free to contact me if I can help you with a mortgage. Make today GREAT!!
After a decent day for the benchmark mortgage bond on Friday, we are seeing a little follow-thru. Bonds are improving marginally on some weakness in stocks (sometimes they trade together, sometimes they don’t). The real reason is some snippets from the Chinese government that they will provide little stimulus. That has stocks under pressure in Asia, Europe and here and coupled with this morning’s existing home sales which were a miss at 5.05m units on expectation of 5.20mm units has mortgage bonds +16bps and outperforming treasuries which are currently yielding 2.56%. The bigger picture is that small bounce we’ve had (we are still down 60bps for the month of September) has the indicators showing bonds are relatively in balance (not oversold much anymore). Rates could certainly improve from here (especially if we get more negative news from Europe) but for the moment, it looks like this is the sandbox we are playing in. Here's the graph for this morning:
While the benchmark bond is not technically oversold anymore, it is still very close to that line so there is some decent potential for more improvement to rates but I would be very cautious in floating and be ready to lock with any kind of good economic news - especially if it's significant. Please like, comment (I always love to get readers' thoughts) and share and feel free to call me if I can help with a mortgage - 702-812-1214.
It's Friday and TGIF. We're one day away from another great weekend of college football and my Utes are taking on the Michigan Wolverines in The Big House and I'm hoping we come out with a win. Oh wait, this would be a post for another blog. I guess I should talk about the mortgage bond market here.
Well after we finally had a day where we closed up, we started the morning with some follow-thru and were up about 15 basis points when investors apparently decided that since it's Friday, perhaps they should sell and take some profits so that they could have some pocket money for the weekend. Even after the leading economic indicators came in at .2 vs. expected of .4, the benchmark bond remained underwater. Never fear, it's nothing a little Honey Nut Cheerios can't cure - after I was done having my nutritious breakfast, I saw that the bond had reversed it's trend and was up 10 basis points. Here's the current chart:
The benchmark bond is currently 2 basis points below its high for the day and 9 basis points below the 1st level of resistance - it's up 14 basis points as I write this. If it could close above this, it could be a buy signal to investors. Providing additional ammunition to buy mortgage bonds is the fact that according to the RSI, it is still oversold. We've seen a mixed bag of economic data over the past week so that doesn't help provide investors with any sense of direction. For now, you may want to take advantage of the small gains from yesterday and today and lock your loans and just enjoy a great weekend. Of course, you may be the type that wants to wait and see if we get any more gains on Monday. So which is it? Please feel free to share your thoughts in the comments section and like and share this with your friends. I'm happy to help with any questions regarding mortgages. Make it a great weekend.
Will today be a reversal of fortunes? Both Tuesday and Wednesday saw the Benchmark bond get off to a promising start with early morning price increases in the 20+ basis point range only to see investors sell off throughout the day to end down. This morning on some stronger-than-expected initial and continuing jobless claims, the benchmark bond is starting the day down - it is currently down 12 basis points. Here is the chart:
The silver lining in this rain cloud of a two-week down-trend is that the bias has yet to change - in other words, the RSI is still showing as oversold. If analysts think that the fundamentals of the market have changed and that rates will necessarily move higher and stay there, then the bias would change and we wouldn't be oversold. This means there is a possibility of a bounce - not a guarantee, but a possibility. The put the recent movement in perspective, the bond price as declined 168 basis points since its high on August 29th, 35 of that was due to the monthly roll-over so there has been a net decline of 133 basis points which translates into an increase in rate of about just under .375% - that's a pretty big jump in just under 3 weeks. Rates are low, very low, from a historical perspective so I wouldn't feel bad if I locked now, but I would consider locking now because there's no real sign that we will get the benefit of any sustained bond-buying.
Leading Economic Indicators is the only economic data on tap for tomorrow and that isn't typically a big influence on bonds though it is expected to come in a half point lower than last month (.4 vs. .9). The market is currently only down 7 basis points which is a 5 point improvement from when I started writing this - maybe today is the day for a reversal of fortunes. Please feel free to comment and like my posts as well as share them with your friends and subscribe. Make today great.
It's humpday morning and the benchmark bond is following in yesterday's shoes, which is to say that it is currently off the morning highs - in this case by 9 basis points, up 10 for the day. Yesterday it got up as high as 23 basis points and had given it all back by the end of the day closing down 5. There was really no economic news driving the market yesterday and there isn't much to influence it today with all of the CPI numbers coming in slightly below expectations and having a minimal positive impact on pricing. The National Association of Home Builders released their housing market index and it came in at 59, 3 points higher than their expected 56. This is the highest reading since 2005 but doesn't typically have much of an influence on mortgage bond pricing. Here's a look at today's chart:
With some mixed economic data over the last week and not much going on in the world (other than the Ebola virus break out and the typical middle-eastern stuff with ISIS), the markets are looking for direction. The Relative Strength Index (RSI) is still oversold so from a technical standpoint, we could see some buying as investors may look at current prices as an opportunity. However, it's been oversold for a few days and we haven't seen a whole lot of buying yet so they may be waiting to see if tomorrow's jobless claims are higher than expected again. If they are - especially if they are considerably higher (don't count on it) - then we could see some buying and that would be good for rates. For now, float with caution. Be ready to lock if any news comes out that would give the market a reason to sell off. The 200 day moving average will provide support at 101.45 (20 basis points below the current price) and then there's another support level at 101.31 - if the benchmark bond sells through that, it could get really ugly. Please feel free to share this with your friends and leave your comments. I'm happy to help with any mortgage-related questions as well - 702-812-1214.
It's an uneventful Tuesday as far as economic data and the benchmark bond are concerned. The bond is up a bit for the 2nd day in a row which is good news but it is 9 basis points off the high for the day and is not having any luck holding the price above the resistance. The good news is that it's still oversold which means investors might be enticed to buy in the hopes of a nice run up and a quick profit. With the geopolitical concerns from ISIS and other groups in various regions of the world - including reports of some infiltration through Mexico, one would think that the bonds would get a bit of a bid but for now there's nothing too exciting to report relative to good news on the interest rate front. I would take 6 or 7 more days in a row of the benchmark bond being up 14 basis points a day - hopefully it ends the day up that much or more - but a really strong up day might encourage some follow-through from smaller investors. Here's a look at the current chart:
The Producer Price Index numbers all came in exactly as expected. We get the consumer versions tomorrow and then on Thursday we get the weekly initial and continuing jobless claims numbers which typically pull the most weight with rates, one way or the other. If I needed to lock a loan and had 21+ days until my closing, I'd probably float with caution - it's important to be ready to lock quickly should the market start to turn. If my loans was closing within 15 days, I would lock now; to keep things in perspective, rates are still VERY low, historically speaking.
As a Certified Mortgage Planner and a former Series 7 licensee, I pay special attention to the asset portion of the mortgage loan application of my clients. Over my 19 years I've notices that only a very small percentage of people are on track (or even close) for a successful retirement. Most of my clients have enough for a down payment and a little bit in reserves after the transaction closes and there is a bigger percentage of clients who are buying move-up homes that have enough for 20% down and a fair chunk left over after that but not much in the way of liquid investments such as a 401(k), IRA (traditional or Roth) or any other investment account.
Arbitrage: If you watch the Granthem Investment video series, you will hear Bryan say that he recommends that you do what the banks do, don't do what the banks tell you to do. The main way that banks make their money is by arbitrage which is to say that banks borrow money from people who deposit their money in money market and savings accounts as well as CDs. They pay a paltry fee for this - check the yield on your savings account - then they turn around and loan money out for credit cards, car loans, mortgages and such at much higher interest rates and make huge profits. If you have money sitting idly in a home in the form of equity, you may be able to access it and get it working for you by investing it in any number of things - I prefer very safe investments if you are going to pull money out of your house (or in the case of purchasing a new home, you can choose to put less money down and keep more money for investing - I have a great example on the Granthem Investment videos). Money in your home in the form of equity is illiquid and isn't providing you with a return on investment. Pulling that money out gives you the opportunity to diversify and get more assets to work for you. In such a case, I recommend investing in private money mortgages or indexed universal life policies.
Diversification is great because it spreads the risk. However, it's important that you diversify with investments that all have the potential to provide a good return AND you want to account for the likelihood of higher taxes down the road as much as possible. There's a wide variety of traditional investment accounts such as brokerage accounts for trading stocks, bonds, mutual funds, options and such. Additionally, there are retirement versions of brokerage accounts such as your company's 401(k) as well as individual retirement accounts (IRAs) including the traditional and the Roth - I prefer the Roth because while there is no tax deduction for the contribution you make now, your investments grow tax free and when you start taking money out, there's also no tax on it. One thing to note about IRAs is that the earliest you can withdraw money from them without a 10% penalty is when you turn 59.5; you have to begin withdrawals on the April 1st after you turn 70.5 - I recommend leaving the money in to let it grow as long as possible - if you have it invested in something decent (see my video series with Bryan Granthem about a safe investment with a solid return - https://www.youtube.com/watch?v=Sfu5IJPbcRI&feature=youtu.be - this is episode 2), you could double your money or more with that extra 11 years that you leave the money in your IRAs.
Some ideas for diversification: There is a wide variety of investment choices and it's important to become as knowledgeable as possible on the various choices. Some of the more traditional investment options include individual stocks, bonds, mutual funds and options - options are tied to stocks and are a more risky investment so it's extra important to do lots of homework about the various options and their strategies. Real estate is a great option because there are a few good strategies to choose from including fix and flip (it's important to have a great Realtor and contractor) as well as investment properties which can provide monthly income, appreciation and tax benefits. Traditional retirement accounts allow you to invest in stocks, bonds, mutual funds and options (depending on the type of account) and they have some tax benefits in that the investments grow tax deferred; hence, if you have 100 shares of Apple and sell it for a huge profit after quarterly earnings far exceeded expectations thanks to the iPhone 6+, you don't have to pay capital gains tax on this profit in an IRA (traditional or Roth). Self-directed IRAs are also a great thing because you can invest in real estate as well as do things like fund private mortgages - see the Granthem Investment series of videos on YouTube. If you don't know about the Solo 401k, you need to learn about this - it's amazing. The final investment type I will cover here is live insurance / annuities. There are some great options that allow you to have access to your money anytime without penalty AND your investments grow tax-deferred and you get to access your money tax free. The investment vehicle that I use for this is the Universal Indexed Live policy.
Side note on asset protection: It's very important to protect your assets; even if you don't have much wealth currently, it's important to have a trust. If you own investment properties, you should have an LLC (in Nevada, you should have a Series LLC). There's a lot of reasons why you should have a trust and possibly an LLC and strategies on how to use them but that is for another post - I work with some great estate planning attorneys and I'm happy to make a recommendation.
I can recommend any of the professionals that I have talked about above - I have worked with a great contract who I would highly recommend as well as a number of great Realtors. I also have a great life insurance agent who can help with those types of investments and Bryan Granthem can help you set up self-directed retirement accounts and help you with private mortgage investments. The key is to take action and get started and I'm happy to review your personal situation and discuss your options and pair you with the right professionals. Here's episode 1 of the Granthem Investment Series:
I would also recommend that you watch episode three of How to Avoid the Most Common and Costly Mortgage Mistakes: https://www.youtube.com/watch?v=K1dqI756MHU
Please feel free to leave comments and questions and share this with your friends. Don't forget to subscribe to my blog and my YouTube channel so that you will get notified when new posts and videos are up.
Well it's Friday and TGIF. The benchmark bond has gotten it's proverbial butt kicked since it's near-term high of 103.08 on August 29th. With a rash of fairly decent economic news plus an announcement by President Draghi (president of the European Central Bank), the bond has sold of steadily over that time and is currently sitting at 101.54 - down 154 basis points in the last 9 days of trading. This is equivalent to about 3/8ths in rate. What was 4.25% on August 29th is now 4.625%. To put this in perspective, rates are still great, there's now two ways about it - 4.625% is still VERY low. However, the recent (strong) move sends a message that we are now in our upward trend that we have been anticipating since the Fed decided to end the QE3 program. Only geopolitical unrest and bad economic news have delayed the upward trend in rates but now that both appear to be getting better, the movement upward appears to be on.
Currently, the benchmark bond is oversold according to the relative strength index so we could see a bounce. However, more good economic news could provide us with a reset to where bond traders don't see the market as oversold and then we could be in for a much bigger fall in bond prices sending rates into the 5% range on conventional loans. Because the benchmark bond is oversold I would float with caution but if we get a reset, I would lock quickly.
Please like, comment, share and subscribe - I would really love to hear your thoughts and questions. Make it a great day and an even better weekend.
Continued selling this morning in the bond an mortgage markets.
Every day this week the 10 yr note has broken each level of
technical support as rates climb. This morning the 10 started at 2.58%,
above 2.57% that was the third support taken out with relative ease. The
rate markets increasingly believing (at least until next Wednesday)
that the FOMC will change the language in the policy statement to
indicate the Fed is more likely to increase rates sooner than what had
been expected just a couple of weeks ago. August retail sales were right on the estimates; up
0.6% overall and +0.3% when auto sales are extracted. Consumer spending
is increasing; July sales were revised frm unchanged to +0.3%. Sales in
August the highest in four months; consumer spending accounts for 70% of
the economy. Most recent economic reports have been better than what
was expected; jobs improving, gasoline prices declining and slight
increases in wages will pressure the FOMC to address the slow but steady
improvement and change the language from “ interest rates will stay low
for a considerable time” to a more specific timing. Better economic outlook and no safe haven buying has pushed the bond bulls out on a limb.
Traders long treasuries, both in the US and Europe are being
forced to cover and in turn driving rates higher for the moment. No
market concerns on the increased US involvement in the Mid-east against
the Islamic State as long as combat troops are not employed, and it is
very unlikely they will be. Bombs away isn’t a major market concern.
Ukraine; Russian troops being withdrawn and the cease fire is holding
well. Putin may have gotten what he wanted; setting up a border dispute
between the separatists and Ukraine government will keep Ukraine frm
joining NATO. The EU and US are adding more sanctions on Russia and
Putin is rattling the cage but it isn’t having any market impact. At 9:30 the DJIA opened -34, NASDAQ -9, S&P -5;
10 yr note 2.60%, 30 yr MBS price -23 bps frm yesterday’s close and -39
bps frm 9:30 yesterday. 9:55 the U. of Michigan mid-month consumer sentiment index, expected
up to 83.4 frm 82.5, as reported, another better report at 84.6. The 10
at 2.60% on the report and stock indexes slipped a little. The final data this week; July business inventories, were expected up 0.4%, as reported, up 0.4%. No reaction to the number. Interest rates increasing, US stock indexes sitting within narrow ranges this week.
A complete purging of bullish sentiment in the interest rate
markets and likely being overdone for the moment. The bond market is at
very oversold levels based on all of the momentum oscillators. We look
for a little bounce next week; not a change in the direction but rates
have increased too much too quickly and sellers are going to run out of
enthusiasm until rates slide back a little. Still no assurance the Fed
is going to move any quicker than what was thought a couple of weeks ago
(mid 2015). Yellen has not deviated about the quality of the jobs being
created and the “slack” in the employment sector. The rate markets may
be getting a little ahead of the reality at the moment. That said, go
with what we have now, and don’t attempt to front run the bearishness.
27 bp increase in the 10 yr note rate in nine session; too big in too
short a time. PRICES @ 10:00 AM
10 yr note: -13/32 (41 bp) 2.60% +5 bp
5 yr note: -4/32 (12 bp) 1.82% +3 bp
2 Yr note: -1/32 (3 bp) 0.58% +2 bp
30 yr bond: -29/32 (91 bp) 3.33% +5 bp
Libor Rates: 1 mo 0.153%; 3 mo 0.234%; 6 mo 0.330%; 1 yr 0.582%
30 yr FNMA 3.5 Oct: @9:30 101.54 -23 bp (-39 bp frm 9:30 yesterday)
15 yr FNMA 3.0 Oct: @9:30 103.09 -6 bp (-22 bp frm 9:30 yesterday)
30 yr GNMA 3.5 Oct: @9:30 102.99 -31 bp (-42 bp frm 9:30 yesterday)
Dollar/Yen: 107.35 +0.24 yen
Dollar/Euro: $1.2923 -$0.0002
Gold: $1234.60 -$4.40
Crude Oil: $92.75 -$0.08
DJIA: 16,996.47 -52.53
NASDAQ: 4573.68 -18.13
S&P 500: 1989.55 -7.90
About Jed Wunderli
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RATE UPDATE: Rates have been inching up over the last several days as investors have been selling bonds. Draghi - European Central Bank president - assured countries in the European Union that he would do everything possible to get the economy on the right track. This is perhaps the major driver behind the sell-off in bonds, though we have also had some good economic news over the last week and a half an that's never good for bonds. The silver lining is that bonds are currently oversold so if we get some bad news on the jobless claims front tomorrow, we may see a nice little bounce as investors decide to buy. Conversely, if the news is neutral or good as far as jobless claims (both initial and continuing) are concerned then the current ceiling for rates may become the new floor.
Self-directed Solo 401k and Roth IRA, a great way to invest for retirement: If you are working hard to save for retirement, it's important that you are aware of some tools that may make a huge difference regarding your success. I just recorded a video with Bryan Granthem of Mojave Capital and it has some great information including one tip that if you don't take advantage of it could cost you $1.44 million or more. Here is the video on tax planning and investing.
The video is 20 minutes but it's jam-packed with valuable information. You may also want to check out episode 3 of How to Avoid the Most Common and Costly Mortgage Mistakes which gives some great information on investing as well. I will be publishing a couple of related videos that I recorded with Bryan in the very near future so keep your eye out for them.
Please feel free to give your thoughts and feedback and subscribe to my YouTube channel so that you can get notified when I post new content. If you have friends that are also trying to prepare for retirement (it's never too early or too late), please share this post and the video with them. Make it a great day.
