Early this week we saw the 30 year mortgage rates dipp as low as 4.25% for a short period. Since then we have bounced back and forth from the mid 4's to low 5's. We finished Friday at 4.75%. I would expect the volitility to continue for some time. With that said I dont think we are going to see rates jump back up to 6% anytime soon.
The housing sector will also receive close scrutiny on Tuesday with the release of both the existing and new home sales reports for last month. In October's report on existing home sales, the National Association of Realtors said that the seasonally adjusted, annualized pace fell by 3.1% to 4.98 million. This was down from September's rate of 5.14 million and all regions of the country saw declines.
Inventories of homes on the market declined by 0.9% but the drop in the sales pace pushed the turnover time up to 10.2 months from September's 10 months. The average home price fell by $10,300 or 4.4% to $224,700. This was the lowest average since March of 2004. The median price fell by 4.2% or $8,100 to $183,300 - the lowest since April of 2004.
Despite the latest decline in sales pace, lower prices have been providing some support for the market. September's sales pace was the highest in a year and October's sales were just 0.7% below where they were a year earlier (unadjusted).
Forecasters are calling for another decline in the sales pace in November to between 4.95 million and 4.90 million.
In the new home category, the Commerce Department said that the sales rate fell in October by 5.3% to 443,000, the lowest level since January of 1991. September's originally reported rate of 464,000 was revised down to 457,000.
With declining sales, builders have cut back on new construction. The level of new home inventory on the market at the end of the month (adjusted, annualized) was 381,000, the lowest since March of 2004. At the prevailing sales pace, this represented 11.1 months of supply, up from 10.9 months in September.
The average new home price fell by $11,400 in October to $272,300, the lowest since August of 2004. The median price fell by $3,700 to $218,000, the lowest since September of 2004. The average price was down by 12.2% from a year earlier and the median price was down by 7.0%.
For November, analysts are predicting another decline in the sales pace to between 415,000 and 420,000.
Saturday, December 20, 2008
Tuesday, November 25, 2008
Arkansas Mortgage Rates
Arkansas Mortgage rates dropped dramatically after the Federal Reserve announced that it would buy up to $500 billion of securitized home loans.
Rates on 30-year, fixed-rate, mortgages fell into the low to mid 5’s after the Fed announced Tuesday morning that it would buy up to 500 billion dollars' worth of mortgage-backed securities over the next 12-18 months. The Mortgage Bank of Arkansas had rates as low as 5.25% for a while. Last week, the Arkansas 30-year fixed averaged 6.125- 6.375%.
The rate reduction is exactly what the Fed intended: "This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally," the central bank said in its announcement.
Two years ago, the average rate on a 30-year fixed was about 6.5 percent. At that rate, the principal and interest on a two hundred thousand -dollar loan was $1,264 a month. Now, if someone borrowed $200,000 at 5.5 percent, the monthly principal and interest would be $1,104. This is a yearly savings of almost two thousand dollars. A Arkansas homeowner could make an additional mortgage payment each year with the savings thus cutting several years off of their mortgage.
The Fed's action helps not only buyers, but also homeowners with adjustable-rate mortgages who want to refinance into fixed-rate loans
Rates on 30-year, fixed-rate, mortgages fell into the low to mid 5’s after the Fed announced Tuesday morning that it would buy up to 500 billion dollars' worth of mortgage-backed securities over the next 12-18 months. The Mortgage Bank of Arkansas had rates as low as 5.25% for a while. Last week, the Arkansas 30-year fixed averaged 6.125- 6.375%.
The rate reduction is exactly what the Fed intended: "This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally," the central bank said in its announcement.
Two years ago, the average rate on a 30-year fixed was about 6.5 percent. At that rate, the principal and interest on a two hundred thousand -dollar loan was $1,264 a month. Now, if someone borrowed $200,000 at 5.5 percent, the monthly principal and interest would be $1,104. This is a yearly savings of almost two thousand dollars. A Arkansas homeowner could make an additional mortgage payment each year with the savings thus cutting several years off of their mortgage.
The Fed's action helps not only buyers, but also homeowners with adjustable-rate mortgages who want to refinance into fixed-rate loans
Thursday, November 13, 2008
Arkansas' Increase in FHA Lending
Is the rapid rise in FHA Lending in Arkansas a cause for concern? The fall of the subprime mortgage industry and its fallout on conventional lenders has led to such a boom in business at the Federal Housing Administration that the agency is now insuring nearly one in five new residential mortgages, helping salvage some neighborhoods in some of the nation’s battered real estate markets.
The FHA’s surge in business, which includes many loans to high-risk borrowers who put just 3 percent down in markets where real estate prices are in decline, raises questions about a potential hit to taxpayers in the future. An FHA spokesperson however said there is no cause for concern and that FHA is doing very well and that they expect to continue with current FHA lending programs as is. FHA has offset some of their risks buy increasing their Mortgage Insurance.
A big concern with the FHA boom is that values are dropping and nobody’s got a safety net. The tax payers are taking on a lot of risk that use to be on the private sector. Look at some of these alarming FHA Lending Stats:
FHA’s single-family market share has skyrocketed to 17 percent, a nearly six-fold increase in the last two years. This will only continue with current mortgage crisis.
The volume of FHA-insured single-family mortgages, for both purchases and refinances, has risen from an average of $4.9 billion a month in fiscal 2007 to over $24 billion in the last quarter — a pace that threatens to surpass the agency’s congressional authorization of $180 billion in new business for the year.
FHA currently insures 4.4 million single-family mortgages — or about one in every 10 U.S. home mortgages, with a total unpaid balance of $474 billion.
FHA borrowers typically have less money for down payments and poorer credit than conventional borrowers. While most FHA loans require down payments of at least 3 percent, the entire amount can be a gift from a friend, a relative or other sources as long as it isn’t from the seller. The FHA does not set minimum credit scores for borrowers and allows them to have less than stellar credit that would prevent them from obtaining conventional loans. With that said most lenders have instituted their own min credit scores which is now at 580.
When subprime lending dried up, FHA quickly became a good option for many borrowers, including some with good credit and larger down payments. Across Arkansas, lenders and mortgage brokers that sell FHA products have ramped up that part of their business.
Only time will tell if the subprime debacle will bleed over to FHA lending and tax payers bear the burden of the looser lending practices of the FHA programs.
The FHA’s surge in business, which includes many loans to high-risk borrowers who put just 3 percent down in markets where real estate prices are in decline, raises questions about a potential hit to taxpayers in the future. An FHA spokesperson however said there is no cause for concern and that FHA is doing very well and that they expect to continue with current FHA lending programs as is. FHA has offset some of their risks buy increasing their Mortgage Insurance.
A big concern with the FHA boom is that values are dropping and nobody’s got a safety net. The tax payers are taking on a lot of risk that use to be on the private sector. Look at some of these alarming FHA Lending Stats:
FHA’s single-family market share has skyrocketed to 17 percent, a nearly six-fold increase in the last two years. This will only continue with current mortgage crisis.
The volume of FHA-insured single-family mortgages, for both purchases and refinances, has risen from an average of $4.9 billion a month in fiscal 2007 to over $24 billion in the last quarter — a pace that threatens to surpass the agency’s congressional authorization of $180 billion in new business for the year.
FHA currently insures 4.4 million single-family mortgages — or about one in every 10 U.S. home mortgages, with a total unpaid balance of $474 billion.
FHA borrowers typically have less money for down payments and poorer credit than conventional borrowers. While most FHA loans require down payments of at least 3 percent, the entire amount can be a gift from a friend, a relative or other sources as long as it isn’t from the seller. The FHA does not set minimum credit scores for borrowers and allows them to have less than stellar credit that would prevent them from obtaining conventional loans. With that said most lenders have instituted their own min credit scores which is now at 580.
When subprime lending dried up, FHA quickly became a good option for many borrowers, including some with good credit and larger down payments. Across Arkansas, lenders and mortgage brokers that sell FHA products have ramped up that part of their business.
Only time will tell if the subprime debacle will bleed over to FHA lending and tax payers bear the burden of the looser lending practices of the FHA programs.
Wednesday, November 12, 2008
Delinquent Home Owners Get More Help
On Tuesday, federal housing regulators announced a program to fast-track mortgage modifications for homeowners in Arkansas and around the count who are at least 90 days past due on their house payments. Recipients will get some combination of longer mortgage terms (i.e., a 40-year loan replacing a 30-year loan), lower rates or deferral of principal. Currently 9% of all homeowners are in some stage of default in the U.S.
Housing officials call it a "streamlined modification" program. It's for the 20 percent of delinquent mortgages that are owned or guaranteed by Fannie Mae or Freddie Mac. As for the other 80 percent of delinquent mortgages, the government hopes those investors will sign onto this plan, too.
Housing officials call it a "streamlined modification" program. It's for the 20 percent of delinquent mortgages that are owned or guaranteed by Fannie Mae or Freddie Mac. As for the other 80 percent of delinquent mortgages, the government hopes those investors will sign onto this plan, too.
Tuesday, November 11, 2008
Arkansas Loan Limits
Conforming mortgages are appropriately named; they "conform" to the mortgage underwriting guidelines of Fannie Mae or Freddie Mac. Mortgages that meet these criteria are later sold and securitized on Wall Street as mortgage-backed bonds.
But no matter how strong a mortgage applicant's profile may be, conforming loans are still limited by dollar size. The 2009 conforming loan limits, as released by the government, are:
1-unit properties : $417,000
2-unit properties : $533,850
3-unit properties : $645,300
4-unit properties : $801,950
However, maximum conforming loan limits don't apply to all housing markets equally.
Areas designated by the government as "high-cost" get the benefit of higher loan size limits based on typical home prices throughout the region. A condo in Los Angeles, for example, is conforming up to $625,500. By comparison, a home in Little Rock, Arkansas is capped at $417,000.
There are 59 designated high-cost areas in the U.S., most of which are in California. For everyone else, the 2009 conforming loan limit is $417,000. Loans in excess of the 2009 conforming loan limits are commonly called "jumbo", or "super jumbo", depending on their size.
"Conforming" is a Fannie Mae convention so if your loan is not destined for sale and securitization on Wall Street, the loan limits don't apply to you. This is why we keep hammering home the point -- if you've got a jumbo or super-jumbo home loan in the works, think local instead. Local banks and lenders like The Mortgage Bank of Arkansas are often better equipped to handle these loans. The fees are less and the rates are better.
But no matter how strong a mortgage applicant's profile may be, conforming loans are still limited by dollar size. The 2009 conforming loan limits, as released by the government, are:
1-unit properties : $417,000
2-unit properties : $533,850
3-unit properties : $645,300
4-unit properties : $801,950
However, maximum conforming loan limits don't apply to all housing markets equally.
Areas designated by the government as "high-cost" get the benefit of higher loan size limits based on typical home prices throughout the region. A condo in Los Angeles, for example, is conforming up to $625,500. By comparison, a home in Little Rock, Arkansas is capped at $417,000.
There are 59 designated high-cost areas in the U.S., most of which are in California. For everyone else, the 2009 conforming loan limit is $417,000. Loans in excess of the 2009 conforming loan limits are commonly called "jumbo", or "super jumbo", depending on their size.
"Conforming" is a Fannie Mae convention so if your loan is not destined for sale and securitization on Wall Street, the loan limits don't apply to you. This is why we keep hammering home the point -- if you've got a jumbo or super-jumbo home loan in the works, think local instead. Local banks and lenders like The Mortgage Bank of Arkansas are often better equipped to handle these loans. The fees are less and the rates are better.
Monday, November 10, 2008
It Shouldnt Take A Long Time To Process an Arkansas Mortgage
Fact: Working with an experienced Arkansas mortgage lender should only take around 10 minutes to get pre-approval.
The average Arkansas Mortgage lender requires 2 to 72 hours to grant a conditional loan approval. Better than that, an experienced Arkansas Mortgage lender like The Mortgage Bank of Arkansas can grant an approval within 10 minutes after reviewing your income, debts, down payment and credit history. Of course, the Arkansas Mortgage lender has to take your word that all the information providing is accurate and complete. Pre-approval means all necessary financial documents have been provided to the lender.
Would you like to have an Arkansas Mortgage pre-approval in 10 minutes? Contact The Mortgage Bank of Arkansas Today!
The average Arkansas Mortgage lender requires 2 to 72 hours to grant a conditional loan approval. Better than that, an experienced Arkansas Mortgage lender like The Mortgage Bank of Arkansas can grant an approval within 10 minutes after reviewing your income, debts, down payment and credit history. Of course, the Arkansas Mortgage lender has to take your word that all the information providing is accurate and complete. Pre-approval means all necessary financial documents have been provided to the lender.
Would you like to have an Arkansas Mortgage pre-approval in 10 minutes? Contact The Mortgage Bank of Arkansas Today!
Tuesday, October 28, 2008
How to shop for a Arkansas Mortgage
You can save real money if you carefully shop for an arkansas mortgage. Even a one-quarter percentage point difference in interest rates can mean savings of thousands of dollars over the life of the loan.
Banks, credit unions, savings and loans, insurance companies, and mortgage bankers all make home mortgage loans in Arkansas. The terms change frequently, so it's good to compare at least a half a dozen lenders -- or to get the help of an experienced mortgage bank like The Mortgage Bank of Arkansas, who can help you sift through the latest offerings.
Start by deciding what type of Arkansas mortgage you're interested in, whether it's a fixed rate, adjustable rate, or one of the many mortgages available. Once you've narrowed your sights -- for example, to a 30-year fixed rate mortgage for $300,000 -- you'll be ready to compare apples to apples, using the research tools described below.
Newspaper Ads
Mortgage rates and fees are usually published in the real estate sections of metropolitan newspapers. Take a look at these even if you decide to work with a mortgage bank or broker, so that you'll have a sense of the mortgage market in Arkansas.
A Mortgage Broker
Good mortgage brokers are trained to scour the entire market for the best loan at the lowest interest rate. Most brokers collect a fee from the lender (though this ultimately adds a little to what you pay for your mortgage); other brokers charge the consumer directly.
Your Local Bank
If you have a bank you trust, stop by and ask about its offerings (or check its website). But be aware that you'll be offered a limited menu, consisting of only that bank's loan products.
Friends and Relatives
Private sources of mortgage money -- parents, other relatives, friends, or even the seller of the house you want to buy - are a widely used source of home-loan money.
Online Mortgage Sites
Like http://www.themortgagebankar.com/ has many tools necessary to complete your mortgage application and pre planning with a qualified representative.
Banks, credit unions, savings and loans, insurance companies, and mortgage bankers all make home mortgage loans in Arkansas. The terms change frequently, so it's good to compare at least a half a dozen lenders -- or to get the help of an experienced mortgage bank like The Mortgage Bank of Arkansas, who can help you sift through the latest offerings.
Start by deciding what type of Arkansas mortgage you're interested in, whether it's a fixed rate, adjustable rate, or one of the many mortgages available. Once you've narrowed your sights -- for example, to a 30-year fixed rate mortgage for $300,000 -- you'll be ready to compare apples to apples, using the research tools described below.
Newspaper Ads
Mortgage rates and fees are usually published in the real estate sections of metropolitan newspapers. Take a look at these even if you decide to work with a mortgage bank or broker, so that you'll have a sense of the mortgage market in Arkansas.
A Mortgage Broker
Good mortgage brokers are trained to scour the entire market for the best loan at the lowest interest rate. Most brokers collect a fee from the lender (though this ultimately adds a little to what you pay for your mortgage); other brokers charge the consumer directly.
Your Local Bank
If you have a bank you trust, stop by and ask about its offerings (or check its website). But be aware that you'll be offered a limited menu, consisting of only that bank's loan products.
Friends and Relatives
Private sources of mortgage money -- parents, other relatives, friends, or even the seller of the house you want to buy - are a widely used source of home-loan money.
Online Mortgage Sites
Like http://www.themortgagebankar.com/ has many tools necessary to complete your mortgage application and pre planning with a qualified representative.
Saturday, August 16, 2008
Explaining the New Housing Bill
Many people are still a little confused as to what the new housing bill aims to accomplish. It seems to be a very positive move, except for the removal of down payment assistance. This bill will save hundreds of thousands of homeowners.
Under the HOPE for Homeowners Program, 400,000 distressed homeowners can pay off their troubled mortgages and replace them with more affordable, FHA-insured loans. Its estimated that it will refinance somewhere in the neighborhood of $300 Billion in worth of loans into FHA loans. To qualify, a borrower's monthly payment on existing mortgage loans must be over 31% of his or her income as of March 1, 2008 (hence demonstrating the borrower's inability to afford the original loans). The original loans must have been originated before 2008, and secured by the borrower's principal residence (as well as only residence). Also to qualify, the borrower must satisfy FHA underwriting requirements for the new FHA-insured refinance loan.
The FHA refinance will be a fixed rate loan up to $550,400 for at least 30 years, and will include charges for FHA insurance premiums. The maximum loan-to-value ratio of the FHA refinance is 90% of the appraised value. If the refinance proceeds are insufficient to pay off the existing liens, the refinance will not go through unless the original lenders voluntarily agree to accept a short payoff as payment in full. Rules will be established to allow, among other things, equity sharing for the original junior lienholders.
Upon obtaining the FHA refinance, the borrower must share with the FHA at least 50% of any equity realized through a subsequent sale or refinance. The FHA's share in equity will be based on a sliding scale of 100% of any equity realized within the first year of the FHA loan, 90% the second year, and so on, but not less than 50%. The HOPE for Homeowners Program shall be in effect from October 1, 2008 to September 30, 2011.
With certain exceptions, a first-time homebuyer will receive a tax credit of 10% of the purchase price up to $7,500 maximum, for the tax year in which the buyer purchases a principal residence. The tax credit, however, must be repaid like an interest-free loan in equal installments over the next 15 years or in full if the homebuyer sells the property for a gain. A buyer qualifies as a "first-time" homebuyer as long as the buyer (and spouse if any) has not owned a principal residence in the U.S. for the last three years. The tax credit phases out for a taxpayer with a modified adjusted gross income over $75,000 (or $150,000 for joint returns). This tax credit is available for qualifying homes purchased from April 9, 2008 through June 30, 2009
Under the HOPE for Homeowners Program, 400,000 distressed homeowners can pay off their troubled mortgages and replace them with more affordable, FHA-insured loans. Its estimated that it will refinance somewhere in the neighborhood of $300 Billion in worth of loans into FHA loans. To qualify, a borrower's monthly payment on existing mortgage loans must be over 31% of his or her income as of March 1, 2008 (hence demonstrating the borrower's inability to afford the original loans). The original loans must have been originated before 2008, and secured by the borrower's principal residence (as well as only residence). Also to qualify, the borrower must satisfy FHA underwriting requirements for the new FHA-insured refinance loan.
The FHA refinance will be a fixed rate loan up to $550,400 for at least 30 years, and will include charges for FHA insurance premiums. The maximum loan-to-value ratio of the FHA refinance is 90% of the appraised value. If the refinance proceeds are insufficient to pay off the existing liens, the refinance will not go through unless the original lenders voluntarily agree to accept a short payoff as payment in full. Rules will be established to allow, among other things, equity sharing for the original junior lienholders.
Upon obtaining the FHA refinance, the borrower must share with the FHA at least 50% of any equity realized through a subsequent sale or refinance. The FHA's share in equity will be based on a sliding scale of 100% of any equity realized within the first year of the FHA loan, 90% the second year, and so on, but not less than 50%. The HOPE for Homeowners Program shall be in effect from October 1, 2008 to September 30, 2011.
With certain exceptions, a first-time homebuyer will receive a tax credit of 10% of the purchase price up to $7,500 maximum, for the tax year in which the buyer purchases a principal residence. The tax credit, however, must be repaid like an interest-free loan in equal installments over the next 15 years or in full if the homebuyer sells the property for a gain. A buyer qualifies as a "first-time" homebuyer as long as the buyer (and spouse if any) has not owned a principal residence in the U.S. for the last three years. The tax credit phases out for a taxpayer with a modified adjusted gross income over $75,000 (or $150,000 for joint returns). This tax credit is available for qualifying homes purchased from April 9, 2008 through June 30, 2009
Saturday, August 2, 2008
Down Payment Assistance still has a chance
Just as we thought Down Payment Assistance was all but done, there comes a fight from within Congress to keep it. Down Payment Assistance is used to help low and middle-income consumers who are trying to obtain a home loan. It is mostly commonly associated with FHA loans. Under the previous law FHA loans require borrowers to put 3% down however it allows for seller paid Down Payments. The new housing bill that was signed into law last week eliminates Down Payment Assistance. It is estimated that Down Payment Assistance has helped over 700,000 people realize the dream of home ownership. Congress introduced bipartisan legislation, H.R. 6694 that would reauthorize and reform charitable Down Payment Assistance.. The legislation, sponsored by U.S. Reps. Al Green (D-TX), Gary Miller (R-CA), Maxine Waters (D-CA), and Christopher Shays (R-CT) reauthorizes and reforms charitable down payment assistance funded in part by sellers.
The Green-Miller-Waters-Shays plan would re-authorize and reform non-profit down payment assistance and secure it as an allowable source for FHA borrowers. The bill seeks to ensure that providers of the down payment assistance operate in a transparent manner to guard against conflicts of interest. The bill also includes language to ensure that FHA maintains its financial stability by permanently authorizing the Secretary to assess higher premiums to higher risk borrowers.
The Green-Miller-Waters-Shays plan would re-authorize and reform non-profit down payment assistance and secure it as an allowable source for FHA borrowers. The bill seeks to ensure that providers of the down payment assistance operate in a transparent manner to guard against conflicts of interest. The bill also includes language to ensure that FHA maintains its financial stability by permanently authorizing the Secretary to assess higher premiums to higher risk borrowers.
Wednesday, July 30, 2008
Bill signed into Law
Congress passed a housing bill this past weekend and it was signed into law on Wednesday by President Bush. The new law will make many needed changes. It will provide mortgage relief for more than 400,000 US homeowners facing foreclosure. The law will also provide $300bn in federal guarantees to help refinance problem mortgages and will also assist US mortgage giants Fannie Mae and Freddie Mac.
Although there are some very good things in the bill there is one major item that will affect many new Homeowners. This bill will totally eliminate down payment assistance as of Sep 30 2008.
With that said several people in Congress have pledged to do everything the can to keep these programs. It’s estimated that the down payment assistance programs have helped over 700,000 Americans purchase a home. Many consumers would not be able to get a Home Loan without down payment assistance. Company’s like The Mortgage Bank of Arkansas use DPA with a large part of their home loans.
There is still some time but to be safe borrowers seeking home loans that need to be combined with DPA need to act fast. The new law will require that they come up with a minimum of 3.5% for down payment. Many Mortgage Lenders forced to seek out customers who have the money for the 3.5% down payment
Here are the major components:
1. FHA Changes
Mortgage limits for high cost areas will be increased to $625,000 on a permanent basis (115% of the current conforming limit).
The FHA floor will go from 48% to 65% of the current conforming limit. This will put the new permanent floor at $271,000.
Cash down payment is set at 3.5%.
The seller funded down payment assistance program (DPA) will be terminated on September 30.
The risk based premium established by HUD last week will be suspended on September 30. The ceiling on upfront premiums will go to 3%.
2. Fannie and Freddie
The conforming loan limit will be increased to 115% of area median up to $625,000.The bill provides for a federal "backstop" for Fannie and Freddie which allows the Treasury to capitalize the companies by taking an equity stake.
A new regulator with enhanced powers is created.
The bill creates an affordable housing trust fund paid for by assessments on Fannie and Freddie to help prevent foreclosures and facilitate affordable housing
3. FHA Rescue Fund
The bill creates a special FHA refinance program designed to allow the refinance into fixed rate FHA products of up to $300 billion in distressed mortgages.
4. Licensing
Encourages a nation wide licensing and registry system for loan originators by setting minimum qualifications and assigning responsibility to HUD for establishing new rules for those states that do not enact licensing laws.
5. Redevelopment of Foreclosed Properties
Provides $4 billion in funds for local governments to purchase and redevelop foreclosed properties.
6. Tax Incentives
Establishes a range of housing incentives, including a first time homebuyer tax credit and expands the Low Income Housing Tax Credit.
Although there are some very good things in the bill there is one major item that will affect many new Homeowners. This bill will totally eliminate down payment assistance as of Sep 30 2008.
With that said several people in Congress have pledged to do everything the can to keep these programs. It’s estimated that the down payment assistance programs have helped over 700,000 Americans purchase a home. Many consumers would not be able to get a Home Loan without down payment assistance. Company’s like The Mortgage Bank of Arkansas use DPA with a large part of their home loans.
There is still some time but to be safe borrowers seeking home loans that need to be combined with DPA need to act fast. The new law will require that they come up with a minimum of 3.5% for down payment. Many Mortgage Lenders forced to seek out customers who have the money for the 3.5% down payment
Here are the major components:
1. FHA Changes
Mortgage limits for high cost areas will be increased to $625,000 on a permanent basis (115% of the current conforming limit).
The FHA floor will go from 48% to 65% of the current conforming limit. This will put the new permanent floor at $271,000.
Cash down payment is set at 3.5%.
The seller funded down payment assistance program (DPA) will be terminated on September 30.
The risk based premium established by HUD last week will be suspended on September 30. The ceiling on upfront premiums will go to 3%.
2. Fannie and Freddie
The conforming loan limit will be increased to 115% of area median up to $625,000.The bill provides for a federal "backstop" for Fannie and Freddie which allows the Treasury to capitalize the companies by taking an equity stake.
A new regulator with enhanced powers is created.
The bill creates an affordable housing trust fund paid for by assessments on Fannie and Freddie to help prevent foreclosures and facilitate affordable housing
3. FHA Rescue Fund
The bill creates a special FHA refinance program designed to allow the refinance into fixed rate FHA products of up to $300 billion in distressed mortgages.
4. Licensing
Encourages a nation wide licensing and registry system for loan originators by setting minimum qualifications and assigning responsibility to HUD for establishing new rules for those states that do not enact licensing laws.
5. Redevelopment of Foreclosed Properties
Provides $4 billion in funds for local governments to purchase and redevelop foreclosed properties.
6. Tax Incentives
Establishes a range of housing incentives, including a first time homebuyer tax credit and expands the Low Income Housing Tax Credit.
Saturday, July 26, 2008
As I stated in my previous post Arkansas Mortgage Rates as well as national mortgage rates are at their highest point this year. The benchmark for the 30 year fixed is 6.77% and the 15 year fixed is 6.32%. The last time the fixed rate for Arkansas Mortgages was higher was June of last year when it reached 6.82%. When searching for Arkansas Home Loan consumers may want to wait the upturn in mortgage rates out before locking in their fixed rate mortgage.
Today the Commerce Department said that the seasonally adjusted, annualized pace of new home sales fell by 0.6% last month to 530,000. Despite the decline, May's originally reported pace of 512,000 was revised up to 533,000, April's previously reported 525,000 was revised up to 542,000, and March's 501,000 was revised up to 513,000.
The report said that the pace rose by 5.3% in the Northeast and by 2.5% in the Midwest. But in the two largest contributing regions, the rate fell. The South saw a decline of 2.0% and the West saw one of 0.9%.
With new home construction declining, the inventory of homes on the market fell by 5.3% to a seasonally adjusted, annualized level of 426,000. This was a fourteenth consecutive monthly contraction. But since the sales pace picked up, the inventory level represented 10.0 month's of sales, down from a 10.4 month turnover time in May.
The average new home price declined by just $300 to $298,000 but this was 2.6% lower than what it was a year earlier. The median price rose by $3,200 to $230,900 but was 2.0% down on a year-over-year basis.
Today the Commerce Department said that the seasonally adjusted, annualized pace of new home sales fell by 0.6% last month to 530,000. Despite the decline, May's originally reported pace of 512,000 was revised up to 533,000, April's previously reported 525,000 was revised up to 542,000, and March's 501,000 was revised up to 513,000.
The report said that the pace rose by 5.3% in the Northeast and by 2.5% in the Midwest. But in the two largest contributing regions, the rate fell. The South saw a decline of 2.0% and the West saw one of 0.9%.
With new home construction declining, the inventory of homes on the market fell by 5.3% to a seasonally adjusted, annualized level of 426,000. This was a fourteenth consecutive monthly contraction. But since the sales pace picked up, the inventory level represented 10.0 month's of sales, down from a 10.4 month turnover time in May.
The average new home price declined by just $300 to $298,000 but this was 2.6% lower than what it was a year earlier. The median price rose by $3,200 to $230,900 but was 2.0% down on a year-over-year basis.
Thursday, July 24, 2008
Arkansas Mortgage
Arkansas Mortgage rates along with naitonal rates saw a 35 bps increase for the week. There is no one thing causing the increase. It can be linked to a number of things including increasing inflation, tighter lending guidelines all around, a loss of confidence in Fannie Mae and Freddie Mac, and an upcoming general election.
A little later tomorrow morning, the report on new home sales for June will be released. This may have an effect on Little Rock Home Loans In May's report, the Commerce Department said that the seasonally adjusted, annualized pace of sales fell by 2.5% to 512,000. The decline was expected but data revisions changed an originally reported increase of 3.3% to a larger jump of 4.8%. Nevertheless, May's level was the second lowest since September of 1991.
Inventories of new homes on the market continued to decline as builders scale back construction. At the end of May, the seasonally adjusted level of homes on the market was 453,000, the lowest level since May of 2005. At the prevailing sales pace, this represented 10.9 months worth of inventory, the second longest turnover time since September of 1981. This may have a negative effect on Arkansas Mortgage loans.
Average new home prices fell by $9,900 between April and May or 3.1% and the median price fell by $12,500 or 5.1%. On a year over year basis, the average price edged up by $1.600 or 0.5% while the median price fell by $14,000 or 5.7%.
Washinton Mutual was the story of the day. Shares dropped sharpley as concerns grew about their portfolio. Earlier in the week WAMU reported a 3 billion dollar loss.
Downey Finacial was another big loser wih shares down 34%. Downey was one of the biggest sellers of option-ARMs, which let home loan borrowers defer part of the monthly payment and add it to the principal. Option-ARMs become more risky for banks when housing prices are falling because the loan's size can quickly exceed the home's value. In Downey's home state, households are foreclosing at 2.6 times the national average, contributing to a $258.9 million loss in the second quarter for the company and about $600 million in losses over the past year.
A little later tomorrow morning, the report on new home sales for June will be released. This may have an effect on Little Rock Home Loans In May's report, the Commerce Department said that the seasonally adjusted, annualized pace of sales fell by 2.5% to 512,000. The decline was expected but data revisions changed an originally reported increase of 3.3% to a larger jump of 4.8%. Nevertheless, May's level was the second lowest since September of 1991.
Inventories of new homes on the market continued to decline as builders scale back construction. At the end of May, the seasonally adjusted level of homes on the market was 453,000, the lowest level since May of 2005. At the prevailing sales pace, this represented 10.9 months worth of inventory, the second longest turnover time since September of 1981. This may have a negative effect on Arkansas Mortgage loans.
Average new home prices fell by $9,900 between April and May or 3.1% and the median price fell by $12,500 or 5.1%. On a year over year basis, the average price edged up by $1.600 or 0.5% while the median price fell by $14,000 or 5.7%.
Washinton Mutual was the story of the day. Shares dropped sharpley as concerns grew about their portfolio. Earlier in the week WAMU reported a 3 billion dollar loss.
Downey Finacial was another big loser wih shares down 34%. Downey was one of the biggest sellers of option-ARMs, which let home loan borrowers defer part of the monthly payment and add it to the principal. Option-ARMs become more risky for banks when housing prices are falling because the loan's size can quickly exceed the home's value. In Downey's home state, households are foreclosing at 2.6 times the national average, contributing to a $258.9 million loss in the second quarter for the company and about $600 million in losses over the past year.
Wednesday, July 23, 2008
Wednesdays Market
Today Mortgage Rates saw a decline by early afternoon. The average Little Rock Mortgage Rate was 6.5% . Oil continued its decline and is now down $20 from its all time high. It closed at its lowest since June 4. Financial Services Committee chairman Barney Frank (D-MA), Senators Chris Dodd (D-CT) and Richard Shelby (R-AL) on Wednesday rolled out a housing proposal that could be put to the Senate floor for a final vote as early as this week.
“Americans are looking to Congress to deliver solutions to the housing crisis, which has forced millions of homeowners to file for foreclosure, reduced home values for millions more, crippled the mortgage markets, and significantly weakened the American economy,” said Dodd.
The comprehensive housing legislation contains provisions from a Dodd-Shelby bill that was approved by the Senate Committee on Banking, Housing and Urban Affairs on May 20, as well as measures from the Foreclosure Prevention Act, which passed the Senate in April.
Tomorrow morning brings the report on existing home sales for last month. In the last report, the National Association of Realtors said that the seasonally adjusted, annualized pace of existing home sales rose by 2.0% in May to 4.99 million from April's rate of 4.89 million.
Inventories of existing homes on the market slipped by 1.4% to 4.49 million (seasonally adjusted, annualized). At the prevailing sales pace this represents 10.8 months of supply, an improvement from April's turnover rate of 11.2 months. The median home price fell by 6.3% from its level a year earlier. Despite the increase in sales pace and decline in inventory, the data has not altered analysts' assessments that the housing sector remains weak.
To obtain an Arkansas Mortgage you may visit The Mortgage Bank of Arkansas.
“Americans are looking to Congress to deliver solutions to the housing crisis, which has forced millions of homeowners to file for foreclosure, reduced home values for millions more, crippled the mortgage markets, and significantly weakened the American economy,” said Dodd.
The comprehensive housing legislation contains provisions from a Dodd-Shelby bill that was approved by the Senate Committee on Banking, Housing and Urban Affairs on May 20, as well as measures from the Foreclosure Prevention Act, which passed the Senate in April.
Tomorrow morning brings the report on existing home sales for last month. In the last report, the National Association of Realtors said that the seasonally adjusted, annualized pace of existing home sales rose by 2.0% in May to 4.99 million from April's rate of 4.89 million.
Inventories of existing homes on the market slipped by 1.4% to 4.49 million (seasonally adjusted, annualized). At the prevailing sales pace this represents 10.8 months of supply, an improvement from April's turnover rate of 11.2 months. The median home price fell by 6.3% from its level a year earlier. Despite the increase in sales pace and decline in inventory, the data has not altered analysts' assessments that the housing sector remains weak.
To obtain an Arkansas Mortgage you may visit The Mortgage Bank of Arkansas.
Friday, July 18, 2008
Friday: 07/18/08 5:00 PM EDT :
Treasuries muddled along in negative territory throughout today's session. On a number of occasions, prices pared losses but a sense of resignation among traders and thin, Friday afternoon volumes sent prices to near their worst levels of the day at the close. Another decline in oil futures contributed to the perception that stocks would continue to get traction from lower energy prices, though stocks finished mixed.
In late trading, the 10-Year Treasury Note was down by 23/32, raising its yield to 4.08%; the Dow was up by 49.91 points to 11,496.57; and the Nasdaq was down by 29.52 points to 2,282.78.
A barrel of light, sweet crude oil for next month delivery fell by $0.41 on the New York Mercantile Exchange to settle at $128.88. In the last four sessions, the price has fallen by $16.30 and today's close was the lowest for a front-month contract since June 5.
The Dow gained 0.44% on the day and the S&P 500 made a nominal increase of 0.03%. A negative response to the earnings reports from Google and Microsoft left the tech-heavy Nasdaq with a 1.28% loss for the day. But all three indices made progress on the week. The Dow was the best performer with a gain of 3.57%, the S&P 500 rose by 1.71%, and the Nasdaq by 1.95%.
A number of better than expected earnings reports in the financial sector and news of government backing for Fannie Mae and Freddie Mac brightened the mood of stock traders this week and diluted the safe-haven allure of Treasuries. The yield of the benchmark 10-Year Treasury Note rose by 12 basis points, closing today at its highest level since June 25 (yield moves inversely to price).
Next week's economic calendar is extremely light. On Monday, the only major release is the Index of Leading Economic Indicators for last month. In May's report, the Conference Board, an independent research firm, said the index edged up by 0.1%, matching the increase in April. The index was unchanged (0.0%) in March after five months of negative readings.
Back-to-back gains have been rare in the last few years but the modest increases still suggest that the economy is not headed for a dramatic expansion. The main contributors to the positive index in May was the steeper interest rate spread between the effective federal funds rate and the 10-year Treasury yield, a general increase in stock prices, and increases in manufacturers' orders for consumer and capital goods items.
With steep losses in stocks, rising gasoline prices, and declining consumer expectations, another contraction reading is expected. But estimates call for just a decline of about 0.1%.
On Tuesday, there are no major economic indicators scheduled but the Treasury will be selling an additional amount of last January's issue of 20-Year Treasury Inflation Protected Securities (TIPS). TIPS have a fixed coupon (interest) rate, but their face value is regularly adjusted according to the Consumer Price Index, so the interest payout amounts fluctuate according to the changes in inflation. At maturity, the greater of the inflation-adjusted principal or the original face value is paid out.
January's initial offering was met with mixed demand. Bids exceeded the $8 billion offer amount by 1.79 to 1, the lowest bid-to-cover ratio for the security in two years. Individual investor demand was relatively strong, however, with noncompetitive bids totaling $37.5 million -- a two-year high. But foreign demand was lackluster. Indirect competitive bids, which include those from foreign central banks, garnered 52.9% of the issue, the smallest portion in three years.
Tuesday's reopening issue will have a face value of $6 billion. The deadline for competitive bids is 1:00 PM Eastern Time. The deadline for noncompetitive bids is noon.
Out on Wednesday afternoon is the latest edition of the Federal Reserve's Beige Book, an anecdotal summary of economic conditions from the Fed districts, which the monetary policy committee uses as reference material in its regular deliberations. The next Fed policy meeting is scheduled for the August 5th.
The Beige Book reflects economic data that has already been released; however, observers will be watching for any emphasis or change in tone that might provide clues to upcoming policy actions.
Wednesday afternoon also brings the monthly auction of 2-Year Treasury Notes. June's offering was a success. The bid-to-cover ratio for the $30 billion issue was 2.64, the highest in the last eight auctions.
Noncompetitive bids totaled around $696 million. While this was down from $767 million in May, it was still the second highest amount since August of last year. Noncompetitive bids represented 2.3% of the offer amount, down from May's 2.6% but the second highest amount since January.
Foreign demand was solid. Indirect competitive bids received 27.8% of the issue. This was up from the award portion of 21.8% in May and was above the 25.8% average for the twelve auctions preceding June's.
On Thursday, the employment situation will be addressed once again in the jobless claims report. Yesterday, the Labor Department reported that the seasonally adjusted level of initial claims for state unemployment benefits rose last week by 18,000 to 366,000. The increase was the largest in five weeks but it was not unexpected given the 56,000 drop the week before.
The Independence Day adjustment factor is suspected to have contributed to the preceding week's steep decline. The four-week moving average, which smoothes out some of the short-term volatility, declined by 4,500 last week to 376,500.
Regardless of the recent gyrations, the trend is still up. For the first twenty-eight weeks of the year, the weekly average claims figure has been 362,357. For the same period last year, the average was 315,000.
Today's report said that continuing claims for the week ending July 5 (continuing claims must be at least a week old) fell by 81,000 to 3.122 million. This was the largest drop since the first week of 2006 but it too was likely skewed by the holiday.
Like the initial claims data, the underlying trend in continuing claims is also is up. The four-week moving average rose by 16,500 to 3,142,750, the highest reading since mid-February of 2004. For the twenty-seven weeks of data this year, the average continuing claims reading has been 2,941,852. For the same period in 2007, the average was 2,511,407.
Many analysts feel that the latest increase in the initial claims figure was not enough to compensate for the holiday-distorted drop. Therefore, another increase is expected in this week's claims figure.
Also out on Thursday morning is the report on existing home sales for last month. In the last report, the National Association of Realtors said that the seasonally adjusted, annualized pace of existing home sales rose by 2.0% in May to 4.99 million from April's rate of 4.89 million.
Inventories of existing homes on the market slipped by 1.4% to 4.49 million (seasonally adjusted, annualized). At the prevailing sales pace this represents 10.8 months of supply, an improvement from April's turnover rate of 11.2 months. The median home price fell by 6.3% from its level a year earlier. Despite the increase in sales pace and decline in inventory, the data has not altered analysts' assessments that the housing sector remains weak.
A slight decline of 0.8% is predicted for June's sales pace, bringing it down to 4.95 million.
On Thursday afternoon, the Treasury will be conducting its monthly auction of 5-Year Notes. Last month's had mixed results but overall demand was strong. The bid-to-cover ratio for the $20 billion offer was 2.48, the highest in the last eight auctions. But individual investor demand was a little soft. Noncompetitive bids totaled $91 million, down from $118 million in May and down from the average of $109 million in the twelve auctions preceding last month's.
Foreign demand was also relatively weak. Indirect competitive bids received 21.1% of the issue. Although this was a marked improvement from May's award portion of 16.3%, it was still lower than the twelve-month average of 26.0%.
On Friday, the durable goods orders report for June will be released. In May's report, the Commerce Department said that the seasonally adjusted level of new orders for durable goods items were virtually unchanged (0.0%). The figure was in line with analyst predictions but the report said the level fell in April by 1.0% instead of the previously reported decline of 0.5%.
Durable goods are defined as items meant to last three years or more. They are usually labor-intensive to produce, expensive, and therefore often financed. Because of this, the trend in orders provides some insight regarding upcoming production activity and the effect interest rates may be having on the process.
A large but volatile orders category is transportation and it saw a 2.6% increase in May. Excluding the category, the orders level fell by 0.9% after a 1.9% increase in April (previously reported a gain of 2.4%).
Observers also look at the orders level excluding the defense sector since defense orders are not governed by standard market forces. Defense orders were up by 11.3% but excluding the category, orders were down by 0.6% following a 0.8% decline in April.
Another closely watched category is that of nondefense capital goods minus aircraft, seen as a gauge of core business demand. The order level there fell by 0.8% in May after a 3.1% increase in April.
Little change in the overall orders level is predicted for June. Forecasts range from a slight decline to a slight increase.
A little later, the report on new home sales for June will be released. In May's report, the Commerce Department said that the seasonally adjusted, annualized pace of sales fell by 2.5% to 512,000. The decline was expected but data revisions changed an originally reported increase of 3.3% to a larger jump of 4.8%. Nevertheless, May's level was the second lowest since September of 1991.
Inventories of new homes on the market continued to decline as builders scale back construction. At the end of May, the seasonally adjusted level of homes on the market was 453,000, the lowest level since May of 2005. At the prevailing sales pace, this represented 10.9 months worth of inventory, the second longest turnover time since September of 1981.
Average new home prices fell by $9,900 between April and May or 3.1% and the median price fell by $12,500 or 5.1%. On a year over year basis, the average price edged up by $1.600 or 0.5% while the median price fell by $14,000 or 5.7%.
The last release of the week is the final read on consumer sentiment for the month from the twice-monthly surveys conducted by the University of Michigan. The preliminary survey results, released last Friday, showed an overall sentiment index of 56.6, up slightly from June's final reading of 56.4 and better than the 56.0 that analysts had predicted. Despite the improvement, June's reading was the lowest since 1980 and the preliminary reading for July was not much better.
The final index is not expected to have changed much from the preliminary reading.
10:30 AM EDT : Treasuries are down once again this morning but price action has been choppy. Oil futures are up, bouncing after three days of sharp declines. The move in oil has pressured stocks and the indices are currently in negative territory. A better than expected (less awful than feared) report from Citigroup is providing some footing for stocks but the lure to take profits following the rallies of the last two days is generating a selling bias.
There are no major economic releases today so technical factors will take on added significance. Bond traders may feel that recent losses have been overdone but the recent improvement in the financial sector has diluted safe-haven buying of Treasuries.
Traders are also looking ahead to more supply coming next week. The Treasury will be selling an additional $6 billion of last January's 20-Year TIPS issue on Tuesday, its monthly issue of 2-Year Notes on Wednesday (probably $30 billion), and July's issue of 5-Year Notes on Thursday (probably $20 billion).
Since the new issues will have greater liquidity, traders avoid buying the soon-to-be off-the-run issue. Traders who will be bidding at the auction avoid buying the old issue since they want to keep yield levels high (bids are for yield). And many traders take to the sidelines until they learn how well the new issue has been received.
Next week's economic calendar is light but does include the existing and new home sales reports on Thursday and Friday, respectively.
Citigroup's better than expected earnings report joins those from Wells Fargo and JP Morgan Chase this week and is underpinning a recovery in the financial sector of the stock market.
But the price of a barrel of crude oil for August delivery was recently trading up by $1.53 to $130.82 per barrel. Though the bounce is not too surprising following an almost $16.00 plunge in the last three days, traders will be keeping an eye on how far the price moves today. Rising energy prices act as a brake on the economy since they weaken business and consumer spending in other areas of the economy.
The tech sector of the market is currently the worst performer on disappointing earnings reports released after the bell yesterday by Microsoft and Google . . . .
Treasuries muddled along in negative territory throughout today's session. On a number of occasions, prices pared losses but a sense of resignation among traders and thin, Friday afternoon volumes sent prices to near their worst levels of the day at the close. Another decline in oil futures contributed to the perception that stocks would continue to get traction from lower energy prices, though stocks finished mixed.
In late trading, the 10-Year Treasury Note was down by 23/32, raising its yield to 4.08%; the Dow was up by 49.91 points to 11,496.57; and the Nasdaq was down by 29.52 points to 2,282.78.
A barrel of light, sweet crude oil for next month delivery fell by $0.41 on the New York Mercantile Exchange to settle at $128.88. In the last four sessions, the price has fallen by $16.30 and today's close was the lowest for a front-month contract since June 5.
The Dow gained 0.44% on the day and the S&P 500 made a nominal increase of 0.03%. A negative response to the earnings reports from Google and Microsoft left the tech-heavy Nasdaq with a 1.28% loss for the day. But all three indices made progress on the week. The Dow was the best performer with a gain of 3.57%, the S&P 500 rose by 1.71%, and the Nasdaq by 1.95%.
A number of better than expected earnings reports in the financial sector and news of government backing for Fannie Mae and Freddie Mac brightened the mood of stock traders this week and diluted the safe-haven allure of Treasuries. The yield of the benchmark 10-Year Treasury Note rose by 12 basis points, closing today at its highest level since June 25 (yield moves inversely to price).
Next week's economic calendar is extremely light. On Monday, the only major release is the Index of Leading Economic Indicators for last month. In May's report, the Conference Board, an independent research firm, said the index edged up by 0.1%, matching the increase in April. The index was unchanged (0.0%) in March after five months of negative readings.
Back-to-back gains have been rare in the last few years but the modest increases still suggest that the economy is not headed for a dramatic expansion. The main contributors to the positive index in May was the steeper interest rate spread between the effective federal funds rate and the 10-year Treasury yield, a general increase in stock prices, and increases in manufacturers' orders for consumer and capital goods items.
With steep losses in stocks, rising gasoline prices, and declining consumer expectations, another contraction reading is expected. But estimates call for just a decline of about 0.1%.
On Tuesday, there are no major economic indicators scheduled but the Treasury will be selling an additional amount of last January's issue of 20-Year Treasury Inflation Protected Securities (TIPS). TIPS have a fixed coupon (interest) rate, but their face value is regularly adjusted according to the Consumer Price Index, so the interest payout amounts fluctuate according to the changes in inflation. At maturity, the greater of the inflation-adjusted principal or the original face value is paid out.
January's initial offering was met with mixed demand. Bids exceeded the $8 billion offer amount by 1.79 to 1, the lowest bid-to-cover ratio for the security in two years. Individual investor demand was relatively strong, however, with noncompetitive bids totaling $37.5 million -- a two-year high. But foreign demand was lackluster. Indirect competitive bids, which include those from foreign central banks, garnered 52.9% of the issue, the smallest portion in three years.
Tuesday's reopening issue will have a face value of $6 billion. The deadline for competitive bids is 1:00 PM Eastern Time. The deadline for noncompetitive bids is noon.
Out on Wednesday afternoon is the latest edition of the Federal Reserve's Beige Book, an anecdotal summary of economic conditions from the Fed districts, which the monetary policy committee uses as reference material in its regular deliberations. The next Fed policy meeting is scheduled for the August 5th.
The Beige Book reflects economic data that has already been released; however, observers will be watching for any emphasis or change in tone that might provide clues to upcoming policy actions.
Wednesday afternoon also brings the monthly auction of 2-Year Treasury Notes. June's offering was a success. The bid-to-cover ratio for the $30 billion issue was 2.64, the highest in the last eight auctions.
Noncompetitive bids totaled around $696 million. While this was down from $767 million in May, it was still the second highest amount since August of last year. Noncompetitive bids represented 2.3% of the offer amount, down from May's 2.6% but the second highest amount since January.
Foreign demand was solid. Indirect competitive bids received 27.8% of the issue. This was up from the award portion of 21.8% in May and was above the 25.8% average for the twelve auctions preceding June's.
On Thursday, the employment situation will be addressed once again in the jobless claims report. Yesterday, the Labor Department reported that the seasonally adjusted level of initial claims for state unemployment benefits rose last week by 18,000 to 366,000. The increase was the largest in five weeks but it was not unexpected given the 56,000 drop the week before.
The Independence Day adjustment factor is suspected to have contributed to the preceding week's steep decline. The four-week moving average, which smoothes out some of the short-term volatility, declined by 4,500 last week to 376,500.
Regardless of the recent gyrations, the trend is still up. For the first twenty-eight weeks of the year, the weekly average claims figure has been 362,357. For the same period last year, the average was 315,000.
Today's report said that continuing claims for the week ending July 5 (continuing claims must be at least a week old) fell by 81,000 to 3.122 million. This was the largest drop since the first week of 2006 but it too was likely skewed by the holiday.
Like the initial claims data, the underlying trend in continuing claims is also is up. The four-week moving average rose by 16,500 to 3,142,750, the highest reading since mid-February of 2004. For the twenty-seven weeks of data this year, the average continuing claims reading has been 2,941,852. For the same period in 2007, the average was 2,511,407.
Many analysts feel that the latest increase in the initial claims figure was not enough to compensate for the holiday-distorted drop. Therefore, another increase is expected in this week's claims figure.
Also out on Thursday morning is the report on existing home sales for last month. In the last report, the National Association of Realtors said that the seasonally adjusted, annualized pace of existing home sales rose by 2.0% in May to 4.99 million from April's rate of 4.89 million.
Inventories of existing homes on the market slipped by 1.4% to 4.49 million (seasonally adjusted, annualized). At the prevailing sales pace this represents 10.8 months of supply, an improvement from April's turnover rate of 11.2 months. The median home price fell by 6.3% from its level a year earlier. Despite the increase in sales pace and decline in inventory, the data has not altered analysts' assessments that the housing sector remains weak.
A slight decline of 0.8% is predicted for June's sales pace, bringing it down to 4.95 million.
On Thursday afternoon, the Treasury will be conducting its monthly auction of 5-Year Notes. Last month's had mixed results but overall demand was strong. The bid-to-cover ratio for the $20 billion offer was 2.48, the highest in the last eight auctions. But individual investor demand was a little soft. Noncompetitive bids totaled $91 million, down from $118 million in May and down from the average of $109 million in the twelve auctions preceding last month's.
Foreign demand was also relatively weak. Indirect competitive bids received 21.1% of the issue. Although this was a marked improvement from May's award portion of 16.3%, it was still lower than the twelve-month average of 26.0%.
On Friday, the durable goods orders report for June will be released. In May's report, the Commerce Department said that the seasonally adjusted level of new orders for durable goods items were virtually unchanged (0.0%). The figure was in line with analyst predictions but the report said the level fell in April by 1.0% instead of the previously reported decline of 0.5%.
Durable goods are defined as items meant to last three years or more. They are usually labor-intensive to produce, expensive, and therefore often financed. Because of this, the trend in orders provides some insight regarding upcoming production activity and the effect interest rates may be having on the process.
A large but volatile orders category is transportation and it saw a 2.6% increase in May. Excluding the category, the orders level fell by 0.9% after a 1.9% increase in April (previously reported a gain of 2.4%).
Observers also look at the orders level excluding the defense sector since defense orders are not governed by standard market forces. Defense orders were up by 11.3% but excluding the category, orders were down by 0.6% following a 0.8% decline in April.
Another closely watched category is that of nondefense capital goods minus aircraft, seen as a gauge of core business demand. The order level there fell by 0.8% in May after a 3.1% increase in April.
Little change in the overall orders level is predicted for June. Forecasts range from a slight decline to a slight increase.
A little later, the report on new home sales for June will be released. In May's report, the Commerce Department said that the seasonally adjusted, annualized pace of sales fell by 2.5% to 512,000. The decline was expected but data revisions changed an originally reported increase of 3.3% to a larger jump of 4.8%. Nevertheless, May's level was the second lowest since September of 1991.
Inventories of new homes on the market continued to decline as builders scale back construction. At the end of May, the seasonally adjusted level of homes on the market was 453,000, the lowest level since May of 2005. At the prevailing sales pace, this represented 10.9 months worth of inventory, the second longest turnover time since September of 1981.
Average new home prices fell by $9,900 between April and May or 3.1% and the median price fell by $12,500 or 5.1%. On a year over year basis, the average price edged up by $1.600 or 0.5% while the median price fell by $14,000 or 5.7%.
The last release of the week is the final read on consumer sentiment for the month from the twice-monthly surveys conducted by the University of Michigan. The preliminary survey results, released last Friday, showed an overall sentiment index of 56.6, up slightly from June's final reading of 56.4 and better than the 56.0 that analysts had predicted. Despite the improvement, June's reading was the lowest since 1980 and the preliminary reading for July was not much better.
The final index is not expected to have changed much from the preliminary reading.
10:30 AM EDT : Treasuries are down once again this morning but price action has been choppy. Oil futures are up, bouncing after three days of sharp declines. The move in oil has pressured stocks and the indices are currently in negative territory. A better than expected (less awful than feared) report from Citigroup is providing some footing for stocks but the lure to take profits following the rallies of the last two days is generating a selling bias.
There are no major economic releases today so technical factors will take on added significance. Bond traders may feel that recent losses have been overdone but the recent improvement in the financial sector has diluted safe-haven buying of Treasuries.
Traders are also looking ahead to more supply coming next week. The Treasury will be selling an additional $6 billion of last January's 20-Year TIPS issue on Tuesday, its monthly issue of 2-Year Notes on Wednesday (probably $30 billion), and July's issue of 5-Year Notes on Thursday (probably $20 billion).
Since the new issues will have greater liquidity, traders avoid buying the soon-to-be off-the-run issue. Traders who will be bidding at the auction avoid buying the old issue since they want to keep yield levels high (bids are for yield). And many traders take to the sidelines until they learn how well the new issue has been received.
Next week's economic calendar is light but does include the existing and new home sales reports on Thursday and Friday, respectively.
Citigroup's better than expected earnings report joins those from Wells Fargo and JP Morgan Chase this week and is underpinning a recovery in the financial sector of the stock market.
But the price of a barrel of crude oil for August delivery was recently trading up by $1.53 to $130.82 per barrel. Though the bounce is not too surprising following an almost $16.00 plunge in the last three days, traders will be keeping an eye on how far the price moves today. Rising energy prices act as a brake on the economy since they weaken business and consumer spending in other areas of the economy.
The tech sector of the market is currently the worst performer on disappointing earnings reports released after the bell yesterday by Microsoft and Google . . . .
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