Up, Up, But Not Quite Away

June 15, 2010 · Dean Rizzi · 2 Comments

We were expecting a little more, but at least it’s trending in the right direction. We are speaking of the employment report, which showed payrolls rose by 431,000 last month.

That would be very good news, if not for the fact that 411,000 of the new hires were related to the census. Nevertheless, that still leaves a net positive for the private sector. The increase was enough to push the unemployment rate down to 9.7 percent (though some pundits argue the drop was really due to a lower participation rate).

You never want to read too much into a single month of data, but we remain encouraged: job growth and wages picked up from April to May, while the average workweek lengthened. And although moderate compared to past post-recessions, the recovery is looking more sustainable after consumer spending and business investment rose at a healthy pace in the first quarter.

Overall, we think this latest employment report provides another reason to act now in both the mortgage and housing markets.

www.deanrizzi.com

What Now?

May 3, 2010 · Dean Rizzi · 1 Comment

It’s an important question, since it appears the homebuyers tax credits won’t be extended. But it’s a question not to be feared. We think it’s time the housing market stood on its own feet anyway. After all, we can’t gauge the health of a market if it’s still supported with taxpayer stanchions.

But that’s okay; we think the housing and mortgage markets are sufficiently healthy to stand alone. Pessimism is the intellectual position, but the fact is the economy is getting better: Despite worries that American consumers might hunker down for years — spooked by debt, lost savings, and unemployment — austerity has given way to shadows of a new shopping spree: households are replacing cars, upgrading home furnishings, and amassing gadgets. What’s more, wealth – at least wealth measured by equity holdings – is booming.

On the mortgage side, private investors are returning. A California firm recently completed the first private-sector sale of a security backed by mortgages in nearly two years, potentially reopening a market slammed shut by the housing crisis. The $238-million deal was of the highest quality, to be sure, with borrowers making an average down payment of 45 percent and mortgage payments comprising less than 30 percent of income. But as the economy continues to improve and investors become less risk adverse, less restrictive mortgages will be securitized.

Bottom line: we see a growing economy, improving employment, stable home prices, and less restrictive (though higher rate) mortgages in our future. In other words, we see a market for buying and refinancing today.

www.deanrizzi.com

Don’t Expect Too Much From Tax Credits

March 9, 2010 · Dean Rizzi · 2 Comments

We are speaking of the federal homebuyer tax credits, in particular, which seem to be invoked as the blanket explanation for anything that does or doesn’t happen in the housing market. We were more circumspect than most of their ability to sustain any market rally after being extended and embellished in November. That appears the case today. Credits are good at pushing demand forward, but not so good at sustaining demand over time.
We’ve also been circumspect over the ability of low interest rates to keep things moving forward in perpetuity. To be sure, low rates matter and low mortgage rates make more homes more affordable to more people, but it’s still a matter of taking on new debt with a home purchase or lower-cost debt with a refinance. The only way debt can be serviced is with income, usually a job.
It’s really all about employment at this point. Fortunately, the news is improving on that front based on the past three months of employment data. Things might be moving slower than we’d like, but for potential borrowers, that’s actually good news. When employment shifts into gear, interest rates are likely to follow.
So, we’ve said it before, but we’ll say it again: improving employment, low mortgage rates, and stabilizing home prices (which, by the way, we think will remain stable, even with the REO and foreclosure overhang) coupled with soon-to-expire tax credits suggest to us that now is not the time to procrastinate

From the weekly newsletter of Dean Rizzi

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Is Housing Still the Leader?

March 1, 2010 · Dean Rizzi · 1 Comment

That appears to be the case, at least according to data released from the Census Bureau. Going back to 1968, the trend in housing starts has portended the trend in the overall economy. Should we be optimistic or pessimistic? That’s difficult to say. Monthly figures on starts are volatile, and housing starts fluctuate more than many indicators. It takes several months for total housing starts to establish a trend. The good news is that going back to October, the trend in starts has been mostly stable and up. The bad news is that January’s free-fall in new-home sales could pressure the trend to change direction. Or maybe not. The problem in vetting the data is that no two periods are exactly alike and history never repeats itself perfectly. For example, Census Bureau data show that housing completions generally lag housing starts, as would be expected, except in the latter half of 2009, where starts have fallen off a cliff compared to completions, creating a wide, unprecedented divergence. So what does it all mean? Economists who believe that housing is the leading economic indicator aren’t very bullish on the economic outlook. We tend to be a little more bullish, because it can be misleading to read too much into historical correlations of two variables – in this case, housing and the economy. What’s more, the more correlations are vetted and become known, the more their predictive value tends to break down.

DeanRizzi
http://www.drlending.com/

Lower Rates Aren’t In The Bag

June 24, 2009 · Dean Rizzi · 4 Comments

Last week’s drop in mortgage rates was a welcome relief, and you would think that more relief should be forthcoming. After all, inflation appears to be a dead issue, given recent data on producer and consumer prices. Inflation and interest rates are highly correlated: When one falls, the other usually falls in tandem.

But there is more to the story than inflation. All interest rates are determined relative to risk-free market interest rates, with short-term Treasury bills serving as a proxy. But most interest rates are not risk-free. Mortgages rates are certainly not risk-free, which is why they are higher than Treasury bill rates. What’s more, mortgage rates are heavily influenced by rates on mortgage-backed securities (MBS). MBS rates, in turn, are heavily influenced by yields on Treasury bills, notes, and bonds.

And there is the rub. Treasury securities prices tumbled last week after Read more

January home sales in the west are WAY up!

February 25, 2009 · Dean Rizzi · 1 Comment

I just caught this article off of Google AP. I’m passing it along because it gives more detailed picture of the January sales report. NAR reports existing home sales where down to their lowest levels in six years. However, if you look at the western region, they are up 32.1 percent from a year ago. Although prices are down, sales jumped 57% in the bay area!! Buyers are clearly taking advantage of the high inventory. What a great time for young families to get into that first home!

http://www.google.com/hostednews/ap/article/ALeqM5h78GtI74ZouhZ1bCfF7cOWPQWKzwD96IS94O1

Refinance Considerations

February 4, 2009 · Dean Rizzi · 7 Comments

When you’re making your decision, there are several things to keep in mind.

If your current interest rate is significantly higher than today’s lowest rates, you may be able to roll your loan costs into the loan and still get a lower rate than you have today, thereby reducing your interest payments and saving money immediately.

Second, if you are planning to stay in your home for at least three to five years, Read more

YES YOU CAN (Buy a Home)!!

January 6, 2009 · Jean Joh · 8 Comments

I just met with some new clients for a Buyer Consultation, a complimentary service I routinely offer before going out to view homes with anyone. These clients are newlyweds, just starting out in the home buying process, and they were not even sure if they would be able to buy a home at this point, not having had a chance to save up much money for a down payment yet. With their permission, I also invited a mortgage broker to join us for this meeting, so that they might be able to get a better idea of their situation and what they needed to do in order to prepare for their purchase. Well, at the end of the meeting, they (and I) were excited to discover that YES, it would actually be possible for them to purchase a home in this area and perhaps much sooner than they had anticipated. Read more