Good Morning,
I hope your September is off to a great start! The media continues to focus on the debate of our economy heading into a double dip (a second decline in GDP immediately following a short recovery) and/or into a period of deflation. As I read several articles by different sources one central theme becomes clear. It seems the majority of economists and the Federal Reserve feel at this point a double dip is unlikely. One factor that is fueling the media storm is the mixed bag of economic reports and the fact that the FED has needed to revise GDP growth numbers down. However, it is important to note that we are still growing; just not the rate that was forecasted. Second quarter growth was revised down to 1.6% from the forecasted 2.4% As we move into the last part of 2010 there is a large potential for more volatility in both the equity and stock markets. The FED is also committed to using any means necessary to keep the recovery going (see attached.) This volatility will largely be driven by investors trying to get a read on where we are headed. Bottom line is we are growing; American’s personal savings rate is north of 6% and most companies are sitting on sizable cash reserves. Hopefully we will see some of this cash spent in the market to further fuel the recovery.
I am also hopeful rates will continue to remain at records lows to the end of the year. This will give incentive for first time buyers to enter the market and also allow all buyers to qualify for larger purchases. We have also seen some major underwriting guidelines get released in the past several weeks. Please let me know if I can be of service.
Damian
Current Rates:
Fed ready to take 'unconventional measures'
By Hibah Yousuf, staff reporterAugust 27, 2010: 12:43 PM ET
NEW YORK (CNNMoney.com) -- Federal Reserve chairman Ben Bernanke bluntly acknowledged that the U.S. economic recovery has lost considerable steam, but said the central bank has the necessary policy tools to support continued growth.
"The issue at this stage is not whether we have the tools to help support economic activity and guard against inflation," Bernanke said at the Fed annual symposium in Jackson Hole, Wyo. "We do."
Source: http://money.cnn.com/2010/08/27/news/economy/Bernanke_speech/index.htm
Tuesday, September 7, 2010
Saturday, August 14, 2010
Deflation
This week we have seen more downward pressure placed on mortgage rates. However it is interesting that the increased demand in the debt market which normally drives down mortgage rates is not being passed through by the lenders. It seems as if a threshold has been put in place were the banks are no longer willing to lower interest rates. The hot topic is focusing on the “double dip” and if we could enter a period of deflation (a contraction in the volume of available money or credit causing a decline in prices.) On the surface this does not seem bad; but it will further erode home values. Most experts also point to the importance of consumer spending to help spur the economy forward in recovery. Our current average savings rate is 6.4% of after-tax income compared to pre-recession rates of 1 to 2 percent. It is great people are saving more; however, our economy has become dependent on massive consumer spending to create growth. Currently, we are not seeing the necessary spending. I feel like the current environment of experts trying to forecast what is going to happen; are we declining or growing; will probably be here until the end of the year. What I do know is rates are at their lowest levels ever and we have plenty of money to lend. We are still closing our loans on average of 2 weeks and 8 days for an appraisal. Please keep me in mind for any of your clients who need to purchase or refinance.
Have a great weekend and stay cool!
Damian
*Source: Time Vol 176 NO.4 pp 28-31
Top Economists Differ Sharply on Risk of Deflation
ECONOMIST, DEFLATION, UNEMPLOYMENT,
The New York Times
06 Aug 2010 08:10 AM ET
When the latest unemployment figures are announced on Friday, all of Wall Street will be watching. But for Richard Berner of Morgan Stanley and Jan Hatzius of Goldman Sachs, the results will be more than just another marker in an avalanche of data.
Instead, the numbers will be a clue as to which of the two economists is right about where the American economy is headed. Their sharp disagreement over that question adds yet another twist to the fierce rivalry between the firms, Wall Street’s version of the New York Yankees and the Boston Red Sox.
Mr. Hatzius is arguably Wall Street’s most prominent pessimist. He warns that the American economy is poised for a sharp slowdown in the second half of the year. That would send unemployment higher again and raise the risk of deflation. A rare occurrence, deflation can have a devastating effect on a struggling economy as prices and wages fall. He says he may be compelled to downgrade his already anemic growth predictions for the economy.
For months, Mr. Berner has been sticking to a more optimistic forecast, despite growing evidence in favor of Mr. Hatzius’s view. Last week, Mr. Berner was caught by surprise when the federal government reported that the economy grew at a 2..4 percent pace in the second quarter, well below the 3.8 percent he had forecast a month before. Mr. Hatzius came closer to hitting the mark, having projected a 2 percent growth rate.
Mr. Berner and his deputy, David Greenlaw, still expect a pickup in the second half of the year, which would help gradually bring down unemployment. They play down the danger posed by deflation, the malady that deepened the Great Depression and contributed to Japan’s lost decade of the 1990s.
“I’d say at this point the data and the sentiment in the marketplace have certainly gone more Jan’s way than mine,” Mr. Berner said. Some people, he added, “think I’m out of my mind. But I have a conviction in my beliefs that’s based on my analysis.” Full article http://www.cnbc.com/id/38590742
Have a great weekend and stay cool!
Damian
*Source: Time Vol 176 NO.4 pp 28-31
Top Economists Differ Sharply on Risk of Deflation
ECONOMIST, DEFLATION, UNEMPLOYMENT,
The New York Times
06 Aug 2010 08:10 AM ET
When the latest unemployment figures are announced on Friday, all of Wall Street will be watching. But for Richard Berner of Morgan Stanley and Jan Hatzius of Goldman Sachs, the results will be more than just another marker in an avalanche of data.
Instead, the numbers will be a clue as to which of the two economists is right about where the American economy is headed. Their sharp disagreement over that question adds yet another twist to the fierce rivalry between the firms, Wall Street’s version of the New York Yankees and the Boston Red Sox.
Mr. Hatzius is arguably Wall Street’s most prominent pessimist. He warns that the American economy is poised for a sharp slowdown in the second half of the year. That would send unemployment higher again and raise the risk of deflation. A rare occurrence, deflation can have a devastating effect on a struggling economy as prices and wages fall. He says he may be compelled to downgrade his already anemic growth predictions for the economy.
For months, Mr. Berner has been sticking to a more optimistic forecast, despite growing evidence in favor of Mr. Hatzius’s view. Last week, Mr. Berner was caught by surprise when the federal government reported that the economy grew at a 2..4 percent pace in the second quarter, well below the 3.8 percent he had forecast a month before. Mr. Hatzius came closer to hitting the mark, having projected a 2 percent growth rate.
Mr. Berner and his deputy, David Greenlaw, still expect a pickup in the second half of the year, which would help gradually bring down unemployment. They play down the danger posed by deflation, the malady that deepened the Great Depression and contributed to Japan’s lost decade of the 1990s.
“I’d say at this point the data and the sentiment in the marketplace have certainly gone more Jan’s way than mine,” Mr. Berner said. Some people, he added, “think I’m out of my mind. But I have a conviction in my beliefs that’s based on my analysis.” Full article http://www.cnbc.com/id/38590742
Tuesday, March 23, 2010
FHA Loans
Good Morning,
Spring is finally upon us! We have FIVE WEEKS LEFT to get clients under contract to be eligible for the HomeBuyer Tax Credit. NAR reports that 39% of homebuyers are using FHA loans to purchase homes. I personally see over 75% of clients in Atlanta using FHA mortgage loans to make homeownership a reality. Here are some fast facts about FHA that can help you put buyers in homes:
Maximum Loan Amount for Metro Atlanta: $346,250.00
FHA Down payment 3.5%- Borrowers can get a gift for this amount
Minimum Credit Score- 620
Debt to Income Ratio- 55%
6% Seller paid closing costs are allowed (no official word on a change in allowed the amount)
April 5th- The UFMIP will be increasing to 2.25%
The Federal Housing Administration insures these loans helping to keep mortgage rates very low; currently in the low 5%. For most of my clients I can get them a better interest rate on a FHA loan than a Conventional 30 year Fixed, unless they are putting more than 10% down.
At Brayden Capital, we are an FHA Approved direct lender; so we can underwrite and approve FHA loans in-house. Right now my average turn time for an FHA loan is 2 weeks! I am hearing from the market that most banks are quoting 30-45 days to close a loan. Two weeks from the binding date and we can have your client in their new home and you on to making your next sale! So please keep me in mind as the selling season starts and your clients need a lender that can get them to the closing table on time, every time with no surprises.
I hope you have a great weekend and please call me if I can help,
Friday, February 26, 2010
What buyers are buying in Real Estate
Good Afternoon,
I hope February was a solid month for you. It is an interesting time in our industry as this is traditionally the “slow time of year.” However with the Homebuyer’s Tax Credit expiring at the end of April (a buyer must be in a binding contract), many first time home buyers are out in the market place buying homes! According to NAR, first time buyers account for 51% of the home purchased last month and 33% of the homes they purchased were distressed properties. What can we do to take advantage of this trend?
The first is help get the word out. Johnny Isakson who championed both Tax Credits emphasized before the passage of this credit that: “Extending it is important, as long as everybody still understands permanent extension would be bad.”1 We need to let buyers know that if they wait until the summer they will be missing out on $8,000.00! Once we get their attention, how do we get them in a home? FHA, FHA, FHA!
Personally, 95% of my first time buyers are utilizing this program to buy their first home. The underwriting guidelines are very flexible; the minimum credit score is only 620 and we can have the seller pay all the closing costs. So most my first time buyers pay only their down payment of 3.5% at closing and they are in their new home. We underwrite this loan and all our loans in house. This gives you a huge advantage in negotiations because we can close an FHA loan in two weeks with no problems. All our appraisers are local; we do not use national appraisal companies. If you are in a multi-offer situation, putting a short closing date will give you the advantage. We are also offering the FHA 203K loan. This loan allows a buyer to complete up to $30,000 of approved renovations to their purchase. This is a perfect loan for these REO properties. What you need to know here is the turn time is much slower. We need 60 days for closing on a 203K loan. But, where else can a buyer get $30,000.00 for renovations with only 3.5% down?
I hope these ideas and strategies help you generate more sales over the next 8 weeks. Please let me know if I can help in anyway.
Take care,
Damian
770-512-3420
Source
1. http://isakson.senate.gov/floor/2009/110409hbtc.htm
I hope February was a solid month for you. It is an interesting time in our industry as this is traditionally the “slow time of year.” However with the Homebuyer’s Tax Credit expiring at the end of April (a buyer must be in a binding contract), many first time home buyers are out in the market place buying homes! According to NAR, first time buyers account for 51% of the home purchased last month and 33% of the homes they purchased were distressed properties. What can we do to take advantage of this trend?
The first is help get the word out. Johnny Isakson who championed both Tax Credits emphasized before the passage of this credit that: “Extending it is important, as long as everybody still understands permanent extension would be bad.”1 We need to let buyers know that if they wait until the summer they will be missing out on $8,000.00! Once we get their attention, how do we get them in a home? FHA, FHA, FHA!
Personally, 95% of my first time buyers are utilizing this program to buy their first home. The underwriting guidelines are very flexible; the minimum credit score is only 620 and we can have the seller pay all the closing costs. So most my first time buyers pay only their down payment of 3.5% at closing and they are in their new home. We underwrite this loan and all our loans in house. This gives you a huge advantage in negotiations because we can close an FHA loan in two weeks with no problems. All our appraisers are local; we do not use national appraisal companies. If you are in a multi-offer situation, putting a short closing date will give you the advantage. We are also offering the FHA 203K loan. This loan allows a buyer to complete up to $30,000 of approved renovations to their purchase. This is a perfect loan for these REO properties. What you need to know here is the turn time is much slower. We need 60 days for closing on a 203K loan. But, where else can a buyer get $30,000.00 for renovations with only 3.5% down?
I hope these ideas and strategies help you generate more sales over the next 8 weeks. Please let me know if I can help in anyway.
Take care,
Damian
770-512-3420
Source
1. http://isakson.senate.gov/floor/2009/110409hbtc.htm
Friday, January 9, 2009
Start of the New Year
It seems that we all are getting back to work after the holidays. Mortgage rates continue to jump around historic lows creating a demand for refinance and purchase mortgage business. I have seen an uptick in home buyers calling for prequalification this week. I think it is important to stress to clients that these low rates are a product of the FED’s commitment to buy Mortgage Backed Securities (MBS.) The Fed will start buying the MBS this month, creating a market out of thin air. Once the FED runs out of money look for mortgage rates to being to increase, to reflect current market conditions. I hope that they will be able to keep rates low through out the remainder of 2009. These low rates will give consumers incentive to purchase a home. Other important factors making home ownership a great decision right now are the first time tax credit, plenty of inventory and that homes are “on sale.” All these factors do not happen often and now is the time to purchase.
Friday, December 12, 2008
Rates are Falling!
There has been a lot of exciting events in the news. This week we continued to see mortgage rates fall as news of a pending bailout for the big three automobile companies has sputtered to a halt. It also seems as if the 4.5% mortgage rate Treasury program is gaining some momentum and Americans’ debt shrinks for the first time ever. President-elect Obama’s team has expressed interest in supporting the Treasury’s program to purchase Fannie and Freddie securities that are backed by the low rate loans. This is substantial because the outgoing Treasury leaders do not want to start this program just to see it die in January. The Treasury has now placed this program on the fast tract and hopefully we will see something soon. Mr. Obama’s support might make this program a reality and we all know this could have a great effect on the housing and real estate industry!
Last night, the Senate squashed any hopes for an immediate bailout for the auto industry. The fear is that allowing the big three to fail will have large implications for the entire economy due to the fact all the companies are already holding a large amount of debt. If they fail, then the debt will not be repaid and financial institutions will have to take another huge loss. In addition to all the jobs that would be lost directly and indirectly due to the auto failure, I imagine that the government will provide some sort of assistance to prevent this failure. Until this issue is resolved look for continued volatility in all financial markets.
Some positive news is that consumers for the first time ever reduced household debt by about $30 billion dollars. This is both good and bad. It is good because less debt creates more financial freedom for consumers in the long run. Consumers have also started to increase their savings rate largely due to the economic fear and homeowners can no longer rely on house appreciation to create wealth. It is bad because our economy has come to rely on consumers spending every penny they make to create growth.
Damian Cook
Interest Rate Trend Forecast
Long Term (20 days out and greater) – Fractionally lower interest rates
Sources:
Americans’ Debt Shrink-First Time Ever
http://money.cnn.com/2008/12/11/news/economy/flow_of_funds/index.htm?postversion=2008121118
Obama Team Boosts Paulson Proposal to Spur U.S. Home Purchases
http://www.bloomberg.com/apps/news?pid=20601068&sid=adXuRpUpScIo&refer=economy
Auto Bailout collapses in Senate
http://money.cnn.com/2008/12/11/news/companies/auto_bailout_senate/index.htm?postversion=2008121208
Market Alert by Larry Baer
Last night, the Senate squashed any hopes for an immediate bailout for the auto industry. The fear is that allowing the big three to fail will have large implications for the entire economy due to the fact all the companies are already holding a large amount of debt. If they fail, then the debt will not be repaid and financial institutions will have to take another huge loss. In addition to all the jobs that would be lost directly and indirectly due to the auto failure, I imagine that the government will provide some sort of assistance to prevent this failure. Until this issue is resolved look for continued volatility in all financial markets.
Some positive news is that consumers for the first time ever reduced household debt by about $30 billion dollars. This is both good and bad. It is good because less debt creates more financial freedom for consumers in the long run. Consumers have also started to increase their savings rate largely due to the economic fear and homeowners can no longer rely on house appreciation to create wealth. It is bad because our economy has come to rely on consumers spending every penny they make to create growth.
Damian Cook
Interest Rate Trend Forecast
Long Term (20 days out and greater) – Fractionally lower interest rates
Sources:
Americans’ Debt Shrink-First Time Ever
http://money.cnn.com/2008/12/11/news/economy/flow_of_funds/index.htm?postversion=2008121118
Obama Team Boosts Paulson Proposal to Spur U.S. Home Purchases
http://www.bloomberg.com/apps/news?pid=20601068&sid=adXuRpUpScIo&refer=economy
Auto Bailout collapses in Senate
http://money.cnn.com/2008/12/11/news/companies/auto_bailout_senate/index.htm?postversion=2008121208
Market Alert by Larry Baer
Friday, December 5, 2008
4.5% Mortgage
The big news the in the headlines this week is the possibility of mortgage rates dropping to 4.5% in order to boost housing sales. I am very excited about the possibility of this program. It will give an incentive to buyers to get in the market, help reduce standing inventory and have a far reaching economic ripple effect. If first-time homebuyers start buying, this enables those who desire to move into a higher-priced home, the ability to do so; thus, causing a positive chain reaction. The program will be limited to home purchase only. The program might be attractive to lawmakers because it has the ability to get the economy back on track by fixing the housing problem with out bailing out homeowners and lenders. This program will need support from key lawmakers and the incoming Treasury Department Chairman. However, right now the program is still a “pie in the sky.”
Additionally, Bernanke has been in the news asking for more assistance from public funds stating that the private sector is unable to fix this mess on its own. He also feels the central bank can not fix the economy solely through rate cuts and emergency lending programs. The FDIC Chairman is calling for part of the $700 billion bailout to be used quickly for loan modification to prevent further foreclosure. It is wonderful to see all these ideas coming forward to attempt to fix the crisis. However, I feel we need more coordinated efforts across all organizations and the government. Maybe it is time for the President-elect Obama to step forward a take an active roll in getting everyone on the same page. Only time will tell!
Interest Rate Trend Forecast
Short Term (Next 20 Days) - Steady interest rates
Long Term (20 days out and greater) – Fractionally lower interest rates
Sources:
http://www.marketwatch.com/news/story/treasury-may-set-mortgage-rates/story.aspx?guid=%7B2997E462-B056-43E3-AF13-70EB82403632%7D&dist=msr_27
http://www.bloomberg.com/apps/news?pid=20601068&sid=abINDLzbaE54&refer=economy#
Market Alert by Larry Baer
Additionally, Bernanke has been in the news asking for more assistance from public funds stating that the private sector is unable to fix this mess on its own. He also feels the central bank can not fix the economy solely through rate cuts and emergency lending programs. The FDIC Chairman is calling for part of the $700 billion bailout to be used quickly for loan modification to prevent further foreclosure. It is wonderful to see all these ideas coming forward to attempt to fix the crisis. However, I feel we need more coordinated efforts across all organizations and the government. Maybe it is time for the President-elect Obama to step forward a take an active roll in getting everyone on the same page. Only time will tell!
Interest Rate Trend Forecast
Short Term (Next 20 Days) - Steady interest rates
Long Term (20 days out and greater) – Fractionally lower interest rates
Sources:
http://www.marketwatch.com/news/story/treasury-may-set-mortgage-rates/story.aspx?guid=%7B2997E462-B056-43E3-AF13-70EB82403632%7D&dist=msr_27
http://www.bloomberg.com/apps/news?pid=20601068&sid=abINDLzbaE54&refer=economy#
Market Alert by Larry Baer
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