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Tuesday, March 31, 2015

Mortgage Bond Market Analysis - Ignorance is Bliss edition

Ignorance can be bliss but there are also self-fulfilling prophecies and in this case, one may lead to the other.  On the ignorance is bliss side of things, the Chicago PMI (Purchasing Manager's Index) came in far below expectations (52) at 46.3; a reading below 50 means the economy is retracting and this is the 2nd reading in a row below 50 - not good news for our recovery especially with all of the recent mixed data.

On the self-fulfilling prophecy side, consumers drive the economy and the consumer confidence reading smashed expectations (96.4) with a reading of 101.3.  Consumers may not know how dismal things are in the economy but if they believe things are good and they start spending money on everything manufacturers have to offer, the Chicago PMI will soon start reading above 50 again.  How cool is this?  Let's just hope that consumers act on their confidence by spending because that hasn't been happening with the some of the mixed data I referred to being high consumer confidence numbers not showing up in the various data points regarding consumer spending.  The confidence has been derived more from the good jobs numbers but if they don't spend, then jobs won't be around and the Chicago PMI won't be reading above 50 anytime soon.  What a tangled web we have. 

For now, traders are buying bonds on the weak Chicago PMI numbers and pushing the FNMA benchmark bond higher for a 3rd day in a row.  It is currently up 15 basis points (8 basis points off the high for the day) after a 19 basis point increase on Friday and a 15 basis point rise on Thursday.  The RSI is just above the mid-point so we don't have to worry about being overbought and traders starting to sell off.  The 2nd level of resistance (102.27) is proving to be strong as the bond tested it this morning and was pushed back.  Closing above the resistance level with such a strong consumer confidence reading would be good and could lead to some follow through in tomorrow's trading. 

I would float with caution - always be ready to lock if the market turns against you so that you can try to beat a re-price - if you have a loan that is closing in 15-30 days out.  If your loan is 15 days or sooner, I would be very happy locking in the last 3 days of gains in the mortgage bond market; rates are great right now.  Feel free to contact me for a copy of my free report:  How to Avoid the Most Common and Costly Mistakes Made When Getting a Mortgage.  If I can help with anything mortgage-related, please call me at 702-812-1214.  Make it a great day.

Thursday, March 26, 2015

Mortgage Bond Market Analysis - Are you "just" a Realtor?

Good morning on Weekly Jobless Claims Thursday.  Weekly claims came in just a little better than expected at 282K vs. forecast of 290K.  While this isn't a huge win for the economy, there were still more profits to be taken so it is helping to drive more selling in the mortgage bond market.  After the 42 points beat-down yesterday, the FNMA benchmark bond is down 16 basis points and at 101.92 is 4 points above the new first level of support (101.88). 

The RSI has been pushed down to slightly below overbought so from a technical standpoint it's possible that we can bottom out here.  What traders decide to do will depend on the data points tomorrow which include GDP, Consumer Sentiment Index and Gross Domestic Purchase Price Index.  The rest of the world will also have some influence as well which means that bad economic news or news of more unrest will be good for bond prices and rates while signs of strengthening economies and calm will be bad for rates.

As a follow up to yesterday's post where I gave a list of homeowner's tax deductions I want to ask a question:  Are you "just" a Realtor?  Let me put it to you this way, what do you do to differentiate yourself from your competitors?  Your answer can't be great service or your great marketing plan or any other number of canned responses because Realtor is going to say these things and the client won't find out whether it's true or not until after the transaction.  It's like lenders, we're all going to tell you we have the lowest rates (having worked at a number of companies of all sizes throughout my 20+ years in the business, I know our rates are extremely competitive) or the fastest closings (and we'll bring you doughnuts with that rate sheet).

I've seen some Realtors try to dazzle potential clients with statistics - market statistics as well as their own - in an effort to prove their claims of greatness.  Some of this can be good but we all know that numbers can be manipulated and twisted; like the saying goes, there's lies and then there are statistics.
I think it's important to add value to every relationship you have and in business, that means adding value to your clients and partners.  Many people talk about how the home is the biggest single investment that people make but they don't carry that conversation any further than that other than to circle back around to their statistic and why the client should use them to buy or sell this huge investment.  If you really think a home is the largest investment that most people will make, and I believe it is, then why not provide the client with strategies and expertise that helps them take advantage of all the wealth-creating benefits real estate has to offer?

What I'm suggesting is to partner with professionals who can help clients have great success not only with the purchase of a home but in creating wealth for retirement.  A good estate planning attorney can set up a trust (and LLCs as needed) to help protect a client's assets and avoid probate.  A good CPA can make sure that clients are taking advantage of all of the tax deductions (especially for investment properties) that real estate has to offer which will, in turn, help clients maximize their cash flow and wealth creation.  Last but not least, a good lender should be able to provide valuable insight to how leverage can really help create great wealth.  I have a fantastic spreadsheet that I've created to help real estate investors see the kind of wealth they can create by investing in real estate; the spreadsheet gives numbers on income, expenses, appreciation, rental increase, leverage vs. non-leverage investing, tax benefits and more.  Integrating these numbers with some good investment strategies and the expertise of the CPA and estate planning attorney can add enormous value to your clients and generate a lot more business to you due to more transactions per client as well as more referrals.  I'd love to share my system with you so feel free to contact me at 702-812-1214.  Don't just be a Realtor - be the person they go to because you give them so much more than any of your competitors can dream of giving them.  Make it a great day.

Wednesday, March 25, 2015

Mortgage Bond Market Analysis - Hump Day edition

Weak economic data and bonds are selling off?  Durable Goods Orders missed expectations BIG TIME coming in at -1.4 vs. forecast of +.4; ex-transportation it was -.4 vs. forecast of +.3.  This is a big miss and would normally get investors to buy bonds - especially with equities down big this morning.  That said, the recent run-up in the bond market, including a +33 basis point day yesterday probably has some traders wanting to take some chips off the table and take some profits.

The FNMA benchmark bond is currently down 19 basis points and the RSI has been overbought for several days now.  At 102.31, the benchmark bond is just 4 basis points above the first level of support.  Like every Thursday, we get weekly jobless claims numbers tomorrow and we get GDP and Michigan Consumer Sentiment Index on Friday.  The bond continues to trend down and is now down 24 basis points - 1 point below the support level. 

On a completely different note, rates are still fantastic and there are a lot of reasons why people should own rather than rent.  Here is a nice convenient list of tax deductions that people can get if they own their home (sharing this with your clients, whether they bought their home last year or in years past, is a good way to add value and ask for referrals):

·         Points on Home Mortgage and Refinancing. If you have bought a home in 2014 by availing mortgage, then apart from the mortgage interest, you can also write off the points on your tax return. Simply put, ‘points’ are the fees you pay to the lender for getting the loan. One point is equal to one percent of the principal loan amount. The fee varies from one point to three points depending on the trend prevalent in the area. Full deduction can be claimed for the points, provided they pertain to the purchase of the home.
·         Interest on Home Improvement Loan. Interest on home improvement loan is fully deductible if the improvement is made in the main home and it enhances its sale value.
·         Energy Efficiency Tax Credit. This is a tax credit the IRS offers you for making your home energy-efficient by installing equipment that will conserve energy while heating or cooling your home. Qualified storm doors, energy efficient windows, insulation, air-conditioning and heating system, etc are the things that can help save energy and earn you tax credits at the same time. The lifetime limit of the home energy credit is $500, out of which only $200 can be used for the windows. This credit is set to expire on December 31, 2016.
·         Renewable Energy Tax Credit. The Renewable Energy Efficiency Property Credit refers to the tax credit that you get on installing the equipment that uses renewable sources of energy, such as the sun, wind, and geothermal energy. You are eligible to gain this tax credit to the extent of 30 percent of the cost of the following equipment, installation included.
·         Qualified fuel cell property
·         Qualified solar electric systems
·         Qualified solar water heaters
·         Qualified small wind energy property
·         Qualified geothermal heat pumps.
·         Property Tax. The taxes paid to acquire the property are fully deductible from the taxable income and the same is reflected in the Form 1040. Transfer tax arising from the transfer of the property to the new owner is a very common item.
·         Redeemable Ground Rents. The redeemable grounds rents can be deducted if you have been paying monthly or annual rentals.
·         Interest Accrued on a Reverse Mortgage. The reverse mortgages considered as a loan advance and not an income. Hence, the amount you receive is not taxable. Any interest, including the original issue discount, accrued on a reverse mortgage is not deductible until the loan is paid off.
·         Premium Mortgage Insurance. You may be eligible to claim the deduction for the Premium Mortgage Insurance (PMI) on your tax return. However, this deduction is set to expire with the tax year 2014.

Make it a great day.

Thursday, March 19, 2015

Mortgage Bond Market Analysis - Jobless Claims edition

It was a big day yesterday, thanks to the Fed.  This morning the Jobless Claims numbers beat expectations when they came in at 291K vs. 294 expected but this isn't the news.  The news happened yesterday when there were two changes in how the Fed communicated their message.  The change that could have been bad for rates was when the Fed removed the word "patient" from their stance on when they are going to start raising the Fed funds rate.  This means that we may see it as soon as June where as before the consensus was probably more like the fall.  Fortunately the Fed also said that the see "moderate" growth in the economy which was a change from "strong" growth.  As you've read on my blog, there has been a lot of mixed data over the last several weeks and many key data points have been weak.  I think the traders focused on this comment when deciding to buy bonds very enthusiastically, pushing the FNMA benchmark bond up 78 basis points by the end of the day yesterday.

With the news this morning, we are seeing a small sell-off but nothing big yet - and I don't expect anything too big.  Thanks to a nice little run over the last several days, with yesterday being a home run, the RSI is overbought and traders could take that as a hint to sell and take some profits.  The benchmark bond is also currently above both resistance levels which is giving traders pause to think about whether they want to push the price any higher.  Here's a snapshot of the morning chart:

Continuing the theme of more mixed data, the Philly Fed Manufacturing Survey came in at 5.0 this morning vs. expectations of 6.9.  While this is a big miss, it appears traders are focusing more on the technicals I mentioned above as the FNMA benchmark bond is currently down 15 basis points.  My recommendation is that if you have a loan closing in 15 days, I would lock and take advantage of the recent price gains.  If you have a loan that is closing more than 15 days out, you can float with caution - just make sure you keep a watchful eye on the market and be ready to lock if there are any sudden big moves in order to try to beat a reprice. 

The NCAA basketball tournament starts today - I've got a number of brackets filled out and will be working in front of my TV virtually all day today.  Please feel free to call me if I can help you with anything mortgage-related.  Make it a great day and if you're a sports fan, enjoy the tourney.

Monday, March 16, 2015

Mortgage Bond Market Analysis - Quickie Monday edition

It's the Monday after Selection Sunday.  For those of you who are college basketball fans, you know that Selection Sunday is the day we all get to find out what teams are in the field of 64 and who, where and when they are playing.  This is my favorite sports week of the year and I'll be watching a lot of college basketball Friday through Sunday. 

For now, this will be a quick post since the power company is getting ready to shut our power off for about 5 hours to finish some project.  Last week was mostly positive as Monday through Wednesday were all up days.  Thursday was slightly down and Friday closed where it began.  Today we got some more disappointing news with February Industrial Production coming in at .1 vs. estimates of .3.  Additionally, the previous month's reading was revised lower.  The March NAHB Home Builders' Sentiment Index was 53 vs. estimates of 56 - a reading over 50 is positive.  This means that while builders are still bullish for the year, they aren't as positive as they were last month. 

In all, this news is helping bonds off to a good start this week with the FNMA benchmark bond currently up 19 basis points which, as you know if you read my posts or understand how bonds work, is good for rates.  Tomorrow we get building permits and housing starts and Wednesday could be a big day with the FOMC press conference and the Fed interest rate decision - I'm not expecting any changes to the Fed Funds rate but I'm hoping for some more insight as to when they might start raising it. 

That's it for now.  Make it a great day and get your brackets filled out if you're into that sort of thing.  We've had a family competition for years and we all filled out 4 brackets yesterday.  I'm sure I'm going to win - until my wife wins with her scientific analysis based on the colors of the teams uniform and their mascots.  She also looks at wins and losses but doesn't care about strength of schedule or RPI or record against top 25 teams or any of that.  I do usually win, though. 

Feel free to contact me if I can help with anything mortgage-related - 702-812-1214.

Friday, March 13, 2015

Mortgage Bond Market Analysis - TGIF

It's Friday and we have some good news on the interest rate front - which of course means bad news for the economy.  The PPI (MoM) was -.5 versus expectations of +.3 (previous was -.8).  This is not a good thing and but for the fact that the benchmark bond is constrained by some relatively strong resistance at 101.27 because of the technical resistance level and the 100 day moving average, this should have been very positive for rates.  Instead, we began the day with a drop and it was actually down 13 basis points before the University of Michigan Consumer Sentiment was released.  This was also a big miss, coming in at 91.2 vs. estimates of 95.8 - no wonder the retail sales numbers stunk yesterday, consumer confidence is falling after being at ridiculously high levels the last couple of months.

The combination of these two items helped change traders' moods from sellers to buyers as the benchmark bond has done an about face and is now up 15 basis points on the day (28 basis points off the low) and is currently 1 basis point below the first level of resistance at 101.26.  Here's a snap shot of the chart:

The RSI is still closer to oversold than overbought and some timid economic news next week could help continue this little rally we are having.  Of course, with all of the tensions around the world, that helps keep interest rates low as well since traders like the safety of bonds in uncertain times.  

March Madness:  For you college basketball fans, the madness has begun.  With the major conference basketball tournaments finishing up this weekend, Selection Sunday is two days away.  There will be brackets to fill out and lots of potential (and real) upsets to be had.  This is my favorite time of year for sports with the NCAA basketball tournament followed by the Stanley Cup Playoffs and the NBA playoffs.  

Keep a close eye on the mortgage bonds and make sure you are ready to act fast if they start to sell off - unless you've already locked, then you're safe.  Make it a great day and a better weekend.

Thursday, March 12, 2015

Mortgage Bond Market Analysis - Jobless Claims Thursday

It's Thursday which means the Jobless Claims report is out.  Once again we have mixed data with jobless claims coming in at 289K which is better than the expected 306K and the previous week's reading of 325K.  What is horrible for the third month in a row is the retail sales numbers.  With a -.6 reading vs. expectations of +.4, consumers just aren't spending.  All of the job gains from last months non-farm payrolls and previous gains haven't translated and that's probably because the real unemployment rate is much higher than the typical numbers lead us to believe.  Between those who have given up looking for work and those who are entering the job market, the employment gains probably aren't nearly enough to account for both groups which is why we are seeing such dismal retail sales.  Business inventories were also disappointing at 0 vs. the expected .1.  

Initially the benchmark bond was up strongly but after three days of gains this week and some fairly significant sell-off in the stock market the last couple of days, traders decided to keep things in check and the benchmark bond is now down for the day but just 2 basis points - it's 41 basis points off its high and was stable for a while but has recently had a pretty decent sell-off of about 15 basis points or so. The RSI is getting close to oversold again which means with some mixed to bad data tomorrow, we could see some more buying.  I'm just hoping that the current late morning sell-off stops and that we can recover to finish the day up - it would be the fourth day in a row.

With no snapshot of the chart today, I'll go right to tomorrow's schedule.  The PPI will be the highlight of the morning and we will also get the Michigan Consumer Sentiment Index which has been a bit of a farce with strong sentiment but extremely week retail sales.  It's expected to be up a bit over the previous reading.  Make it a great day. 

Tuesday, March 10, 2015

Mortgage Bond Market Analysis - Two Day Win Streak?

Well I was a no-show yesterday.  I intended to write a post and had a snap shot of the bond chart all done and everything but I had one thing after another to do for various clients and then I had meetings and I was just never able to break free long enough to write my post.  I know you missed the excitement and drama yesterday so I'm back today - TIC.

Yesterday saw a nice little rebound for the benchmark bond, closing up 30 basis points on relatively little economic data.  This morning the buying continues in the bond market as we get - you guessed it - more mixed data.  Wholesale inventories were .3 vs. expectations of -.1 and previous of 0.  This is very strong but based on older data so traders are shrugging this off a bit and choosing to focus on the negative, such as the JOLTS report which came in at 4.998 vs. estimates of 5.052.  It was higher than last month's 4.877 but was a big miss relative to expectations.  Personally, I think the fact that the bonds had been selling off for several straight days and the RSI showed they were oversold gave traders confidence that it was time to buy.  Here's a snapshot of whats going on so far this morning:

If you look at the daily chart in the upper right hand corner, you will notice that the bond is trending up.  Let's hope that that trend continues throughout the day is it did a couple of times last week when the trend was down.  The RSI is only slightly above the oversold mark but the FNMA benchmark bond is bumping its head against the first level of resistance at 101.25 and the 2nd level of resistance is only 8 basis points above that.  My hope is that we can have a strong up-trend throughout the day today and break through both resistance levels in a strong way.

Data is sparse tomorrow but Thursday brings us the weekly jobless claims among a few other bits of data and Friday has a smattering of data points as well.  I would float with caution at this point.  I say caution because of two things:  1) the resistance levels may beat the bond back down and 2) we have a couple of decent days of gains so far and you wouldn't want to miss out on the price improvement so watch the bond market closely and if there is a big spike down, be ready to lock quickly before a re-price.  As always, feel free to call me if I can help with anything mortgage related:  702-812-1214.  Make it a great day.

Friday, March 6, 2015

Mortgage Bond Market Analysis - Big, Bad Day

The Good news is that it's Friday...the bad news is that if you didn't lock prior to today (and locking last week would have been best), your rate will be higher by about .125%.  For those who read my posts on a regular basis you know that the first week of the month has all of the important employment reports and today we got non-farm payrolls at 295K vs. expectations of...240K.  NFP crushed expectation and investors are selling off because of it.  The unemployment rate is at 5.5% vs. expectations of 5.6%.  Finally, average hourly earnings came in at .1% vs. expectations of .2%.

The NFP number is BIG and I think investors anticipated this which is why they have sold off all this week (except for a small blip up on Wednesday).  In total, the benchmark FNMA bond is down 98 basis points which is about .25% in rate.  My advice has always been to lock before these kind of reports because of things like this.  The chart looks like it's trending down which means we could see some more sell off throughout the day.

If you have a loan closing in the next 15 days, I would recommend locking now to avert any worse pricing.  The RSI is getting close to oversold but the danger is that the bias may change to where these (and higher) rates are expected.  For the short term, I expect more selling and the only things that will turn this trend around is some bad economic news which doesn't look likely, or some geopolitical events that send investors fleeing to the safety of bonds (vs. stocks).  The other thing that could help is if a stock market correction took place - experts have been calling for a 10-15% correction about 10-15% ago.  Corrections happen but it's anybody's guess as to when the next one will happen.  I think that it's possible rates could be a fair amount higher before it actually happens so if you're closing a loan in the near future, it probably won't help it all unless the correction comes VERY soon.

Please feel free to contact me if I can help with anything mortgage-related.  Make it a great day and a great weekend.

Thursday, March 5, 2015

Mortgage Bond Market Analysis - Mixed-up edition

It's Thursday and that means Initial Jobless Claims, among other things.  Initial Jobless Claims surprised to the negative side again, coming in at 320K vs expectations of 295K.  This is a decent sized miss.  Additionally, Mario Draghi of the ECB announced that their quantitative easing program will begin tomorrow and is scheduled to end in August of 2016.  On the bad side (for the bond markets anyway) of things, Unit Labor Costs were 4.1 vs. estimates of 2.9 and previous of 2.7.  Factory Orders came in at .2 which equaled expectations.  Non-farm Productivity was a mixed bag coming in at -2.2 which was better than the expected -2.3 but worse than last month's -1.8.

Tomorrow's another big day in the data world.  Today's data is causing a bit of a sell-off with the FNMA benchmark bond currently down 6 basis points, 15 basis points off the high and 8 basis points above the morning low.  This is a very narrow range and no real trend has been established yet.  If anything, there is a slight down trend but I wouldn't panic by any means.  Tomorrow should be interesting.  Make it a great day.

Wednesday, March 4, 2015

Mortgage Bond Market Analysis - ADP Private Payrolls edition

It's hump day but we might as well call it "More Mixed Data Day."  If you follow my blog you know that we have had lots of mixed data and the focus is on different things on different days for investors.  Today, the ISM non-manufacturing (it's really about services) index beat expectations slightly with a reading of 56.9 vs. expected of 56.5.  ADP Private Payrolls came in at 212K vs. estimates of 220K.  This is giving a bit of a bid to bonds but of the four employment-oriented data releases this week, this one is the weakest.  There's no fancy charts this morning since I'm travelling and only have my small laptop which doesn't allow me to take big enough screen shots.

The FNMA benchmark bond is 20 basis points off its morning lows and 19 basis points below the morning highs with an uptrend over the last 2 hours and 10 minutes.  Tomorrow brings us initial jobless claims along with a few other data points and the ECB (European Central Bank) policy statement.  Friday brings the non-farm payrolls, unemployment rate and a couple of other things.  Make today great.

Tuesday, March 3, 2015

Mortgage Bond Market Analysis

Down again after losing 38 basis points yesterday, I think the investors are positioning themselves for good economic news on Wednesday through Friday - at the very least, they are hedging their bets.  As I mentioned in my post yesterday, the market was trending down and could possibly continue that trend throughout the day - which it did.  This morning, the FNMA benchmark bond is 16 basis points off the morning low and is capitulating in a relatively narrow range but is still down 6 basis points as of the time I took the snapshot of the bond chart.

We have some big data points Wednesday through Friday, just like we do the first week of every month.  If the data is economically positive, it will be rate-negative.  We've seen a lot of mixed data recently and last Thursday we got a good surprise, as far as rates are concerned, when initial jobless claims came in quite a bit higher than expected.  Unfortunately, the market closed down 26 basis points that day when investors chose to focus on other data or to believe that this was just an anomaly.  We've got four very important job-oriented releases this week with ADP private payrolls tomorrow, Initial Jobless Claims on Thursday, and non-farm payrolls and the unemployment rate on Friday.  There is other data as well and it will be interesting to see how it all plays out.  Here's the snapshot of the chart this morning:

As it stands right now, the current bond price is about right in the middle of the 1st levels of support and resistance and the RSI is at about the 50 mark, also right in between overbought and oversold.  It's all about the data at this point.  What's your strategy?  Are you going to hedge and lock now or are you going to roll the dice and see if you can get some big gains in the form of bad economic data that leads to investors buying bonds and pushing rates lower?

I'll be in Utah the next couple of days for a seminar so my coverage won't be quite the same but I will try to have some commentary on the data releases and their impact on rates.  Feel free to contact me if I can help with anything mortgage related - 702-812-1214.  Make it a great day.

Monday, March 2, 2015

Mortgage Bond Market Analysis - Happy Monday

Another day, another mixed bag of economic data.  So why is the "positive" data winning the day?  First of all, lets review the results.  Core PCE was up .1% vs. expectations of .2% - a slight miss but up nonetheless.  Personal spending was -.2% vs. expectations of -.1% - another slight miss.  January personal income was up .3% vs. expectations of .4% - yet another slight miss but also still up.  January construction spending was up .3% vs. expectations of .2%.  The biggie, The ISM manufacturing index came in at 52.9 vs. expectations of 53 - a slight miss but it still shows growth vs. the previous month (any reading over 50 is growth).  The focus for the traders is on the ISM and when that reading came out, the traders began selling a bit and pushing the benchmark bond past the previous morning low.

After a decent gain last Monday, we've been in a relatively tight channel since then and I don't think we are going to break out of it today unless the investors decide that they want to sell off ahead of more potentially damning news - we have some very important data releases this week remember.  Here's a snapshot of the chart I took right after it started selling off a bit:

If you look at the daily chart in the top right corner you will notice the trend is down and that the current price is below the previous low.  This could mean a downward trend for the day; the first level of support is 27 points below the current price on this chart so it could potentially drop a bit and break us out of the channel we are in - this, of course, would not be good.

The rest of the week brings a lot more data, just like the first week of every month does.  The key points to keep an eye on are the ADP private payroll report on Wednesday (which also brings the ISM non-manufacturing index), initial jobless claims are Thursday - just like every week, and Friday we get non-farm payrolls and the unemployment rate.  These are all important and each of them could impact the mortgage bond market for better or for worse.  If you are going to float your interest rate into any of these reports, keep a close eye on the release so that you can act quickly if necessary.

If you want the occasional intraday updates that I provide on my facebook page, please like The Wunderli Team page.  Please contact me if I can help you with a mortgage or if you have questions about the mortgage bond market / interest rates - 702-812-1214.  Make it a great day and a better week.