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Thursday, January 28, 2016

Mortgage Bond Market Analysis - Jobless Claims Thursday and more weak data

It's that day of the weak (I did this on purpose) again - Jobless Claims Thursday.  We also have some other data that came in rather disappointing so let's take a look.  Initial Jobless Claims came in at 283K vs. estimates of 282K - while this is below the 300K threshold, it is high enough to indicate that jobs aren't being created nearly quick enough to really have a strong economy.  Continuing Claims were 2.268mil vs. expected of 2.217mil - much higher than expected.  The government would like us to focus on the unemployment rate which is down to 5% but considering the fact that that number is skewed based on the change in calculation from how it used to be figured in the early 80s since it doesn't report people who are no longer looking for work, I like to throw in a data point that doesn't get reported the way these other statistics do:  the labor force participation rate.  From the Bureau of Labor Statistics (I wonder how many people it takes to man this bureau), the reported rate for December is 62.6% which is basically at a 38 year low.

So we know there are nearly as many Americans employed as we need to have in order for the economy to be strong yet Tuesday we had a really strong Consumer Confidence number.  Consumer Confidence numbers usually prove themselves with good spending data.  We got a little bit of spending data this morning in the form of Durable Goods.  Expectations were for -.6% and last month's reading was 0; today's reading was...wait for it...-5.1%.  Well what about the ex-transportation figures since that's really the important number, you say?  Last month's reading was also 0, expectations were for -.1 and the actual number was -1.2%.  Consumers just aren't spending the way they need to for a good economic recovery.  Consumers don't spend when 1) they aren't employed, 2) aren't confident that their employment will continue or 3) aren't making enough discretionary income to be able to spend.

Maybe they aren't spending because they are buying bigger ticket items like homes.  There may be a wee bit of weight to this argument.  Last month's Pending Home Sales were weak with a reading of -1.1 (remember this is relative to the prior period and doesn't show the number of units sold - that's a different data point).  This month, expectations were for .8 - a nice increase over last month which showed a large decrease from the previous month which means that it would still be weak; the actual number was .1 which means we are a bit better but after such a poor reading last month it would be hard to be worse.  The bottom line is that if you have money burning a hole in your pocket, go buy something and help the economy.  If you really want to do your part, buy a new primary residence or if you already have one, buy an investment property - I can show you some great strategies to buy it right.  When you buy a home, you will get a fantastic rate - a crappy economy means great rates.  Additionally, the commissions earned by Realtors, the loan officer and the pay it generates for the others involved in the transaction allows them to buy stuff as well.  You can help even further by buying stuff to fix up your new home such as paint, flooring, cabinets and countertops and by hiring someone to do the work, the contractor and their crew now get money to spend (a good rehab loan can help finance the renovations and we have rehab loans for primary residences, 2nd homes and investment properties).  Your new home could probably use some new furniture, unless it's an investment property then the tenants can use their own.  Lest you think I should put my money where my mouth is, I bought a home in October and paid a flooring and paint crew to do a makeover of my entire house.  I also bought a bunch of new furniture from my friend at RC Willey.

Contact me to learn more about investment property loans and how investing in real estate can be a great way to prepare for retirement.  I'm also happy to share how the various rehab loans can help you buy fixer upper homes at great prices and ultimately get you the home you want.  I can be reached at 702-812-1214, 801-853-8720 or  For now, lock if you have a loan closing within 15 days and with oil being the driver for all of the markets, it's a toss-up about locking or floating for loans closing beyond 15 days.  I don't think you can go wrong by locking now but you may be able to get slightly better rates or pricing if you float.  As always, keep a close eye on mortgage bonds if you do float.  Make it a great day.

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