RateWatch - Summer Hatin', Not Having a Blast

Market: We're down another 9bps today, over 100 from Monday's open. Today, if things hold, we'll see four straight days of red candles on the chart. As previously mentioned, there has not been a five-red streak on the bond market for more than three years. Records are made to be broken, but...

Analysis: Economic news has been less bad than expected for most of the week. The gummint is auctioning off $75 billion in treasuries next week. Traders are still vacationing coming into the fall session, and Congress is about to go on recess. Combine all this, and the markets are less jittery than they were, which pulls money from bonds and puts it into stocks, making interest rates rise. That's the explanation.

The real question is: is the recession over? Newsweek says so, for what that's worth, and there are some signs that we may have reached the bottom of the trough. Personally, I'm not so sure. If by "the end" you mean that things are not going to go on getting worse forever, and that we are seeing a slowdown - even a stop - in the decline, then perhaps this could be the end. If by "the end" you mean that the economy is going back on the offensive and a recovery has begun, then no, I think you're out to lunch. Most people think of the end of something as the point where that something stops and something new starts up. By that definition, not only is the recession not over, it hasn't really gotten started yet.

Lessons should be learned from the Great Depression, which this recession mimics in many ways. The decline was steep and sudden, but that's what we usually call a "crash". The thing that put the "Great" in "Depression" was the length of time before things came back to where normal would have been. That's what makes me more cautious here. I think it likely that we could be in this trough a very long time. It takes some years to undo the calamity we spent 30 years getting into.

Keep saving, keep paying off your debts, keep working even if you don't have anyone paying you. That's the way out, no matter what the broader economy is doing.

Cj

Chris Jones

City 1st Mortgage Services

801-310-3407

P.S. Apropos of this, I've finally posted something that's been percolating for a few months. It's called The Most Important Post of My Life, and I'd be grateful if you'll take a second to read it.

RateWatch - Drifting, but Which Way?

Markets: Yesterday was a good day up, and today is down only slightly, so it appears we might hold our gains. We gained 65 bps yesterday and have lost back 16 so far today, which on net is pretty good. For the uninitiated, there is a strong correlation between mortgage-backed securities (mbs) and mortgage interest rates. When mbs rise, rates fall, but the correlation is not 1-to-1. A 50bp move in mbs corresponds to at least a .25% improvement in rate price, which means about .125% better rate (see detailed explanation here). Usually. Not always. Not for every program. Not for every lender. Professional mortgage guys get paid for their services, and there's a good reason for that.

Analysis: Markets liked Ben Bernanke's testimony yesterday. He's forecasting more unemployment, and the economy hitting a bottom here and starting to climb late this year or early next. But he's also telling us that he sees a slow climb, with no huge bounce, especially in real estate. This is what is called an "L" recession, where things fall and then plateau at the new, lower level. I think that's a good analysis. I expect the same, for a good while, until US households shed more debt and build more cash. Right now it is the cash dearth that is starving the economy. That dearth has been created by huge appetites for debt. Eventually, all debt payments come a'cropper, and that's what is happening now. It will pass, if we're smart, and if the government doesn't insist on a recovery according to some electoral timetable.

Which is why I'd get my own house in order as fast as possible. We're not all that smart, and the government always acts according to electoral timetables. The basics still work, though, people. Save some, pay off your debt, find someone to help and help them. That's the way through.

Cj

Chris Jones

City 1st Mortgage Services

801-310-3407

Social Media and Real Estate, Vol. 1

I only address this topic because I can't find a lot of good commentary out there about this specific subject. I'm also no great expert; my experience with social media is pretty small compared to the Great Lords of Twitter and the Ancient Kings of Facebook. I confess this.

On the other hand, since according to Mortgage Strategy only 19% of the real-estate industry is even kind of using social media (this from a tweet this morning), and from experience I can testify that 90% of that 19% is using it badly and doing harm to itself, I thought I might at least give my opinions about how social media might be used well in a real-estate context. I am certainly using these tools better than most in my industry, and that has translated into gigs at Zillow and the Daily Herald Newspaper, so apparently my ideas do not entirely suck. Take them for what they are worth.

Here's how I got to writing this:

From Seth Jenson, a really good Realtor in Colorado: "Chris, what do you think about Twitter vs. Facebook? Do you think I need to be on both?"

Seth-

Whoo. What a question.

Facebook is a terrific way for people to connect. I'm no huge FB-er; I have about 400 friends, which is not a big number by any stretch of the imagination. I don't spend a lot of time trying to find friends on FB, or I likely could have a couple hundred more. And maybe I ought to do that. Probably I ought to do that. But it depends on what I'm using Facebook for.

If I'm using Facebook to keep tabs on people I know - my family, my close friends here in town, a few of the guys I went to HS with - then I'm doing it the right way. You can't possibly keep track of the doings of 1000 people every day. Impossible. However, if one of the reasons for you to be on Facebook is that you want people to remember YOU, well, then you might want a few more friends. You'd want to update your status at least once a day, and probably more than once. These wouldn't all be real-estate updates. In fact, most of them would be about anything except real estate, and would be only for the purpose of strengthening relationships. It is those relationships that bring the referrals that make you successful, and coincidentally, it is those relationships that make your life richer and more rewarding, so that's a happy thing. Facebook makes strengthening those relationships easier than ever, so I would definitely be on Facebook.

Twitter is very different. I love Twitter, myself. I like Twitter better than Facebook. Where I post or comment about 5x a day on Facebook, I do that twice as much - or more - on Twitter. Twitter is a research tool as much as it is a communications network. I get a lot of my news from Twitter, most of my reading material, and have most of my online conversations there, even more than email. Now, again, it depends on what you're using the tool for. Twitter can be a huge and pointless waste of your time. It can also do you harm, I think. But if you use it with respect, I think it has the potential to be incredibly valuable.

Here are some examples. I am not a big noise on Twitter. I have fewer than 200 followers. I'm following only about 100 people. I determined when I got involved that I wouldn't try to amass a gigantic following until I had some idea what I was doing it for. I didn't know enough about Twitter to know what I was doing, so I figured I'd start by following some people that DID know, namely, those that have good blogs about social media. So I followed Amber Naslund, Olivier Blanchard, Beth Harte, and some others, and learned about what Twitter could do, and more importantly, what I should NOT do on Twitter.

Then I started using the search functions of TweetDeck - TweetDeck is an indispensable tool for using Twitter - to follow mortgage news. There were some interesting conversations that came out of that, which resulted in my following Tyler Osby, Dan Green, and Agentopolis and a few others. They are doing most of the blogging and commenting about what's going on in the mortgage industry. There were two or three other topics that I thought would be good (hobbies, etc.) so I started running searches on those as well. I've acquired my 160 or so followers through conversations, not spam. In fact, most of those that are following me would unfollow if I used Twitter to promote myself ad-style. But because I blog, many of them are reading what I write, and following them allows me to read what they write, get smarter, and engage them in conversation. Again, for me it is about the relationships. It's made me better at mortgages, even though I haven't spent a great deal of time on Twitter talking about mortgages per se.

Bottom line? Yes, you should be on Facebook and on Twitter. Figure out what you want these tools to do for you, and design a strategy to get them to do that. Expect it to take time. If you do it right, it will take a lot of it, and a fair amount of work as well. Farming does.

Good luck. Follow me on Twitter @chrisjoneslehi, or find me on Facebook at www.facebook.com/chrisjoneslehi.

RateWatch - What Goes Up, Must Come Down

Market: Bonds are taking a hammering the last couple days (off 65bps today), with economic news better than expected. Empire State manufacturing numbers were, well, not UP, but a lot less DOWN than expected, and core CPI doubled from .1 to .2, so the stock market moved up and bonds are coming down. This takes rates higher. We're in the low 5% range and moving toward 5.5%.

Analysis: A manufacturing reading of 0 means that the industry is stable, so today's reading of -.55 is not good news except in the context of last month's reading, which was -.9.45. So things are looking up. Sort of. The inflation number continued to be higher, boosted by a spike in oil prices, but stripping that out the core CPI was still higher than expected, the second such inflation reading to the high side this week. Mortgage-backed securities have dropped about 100 bps this week so far, a now three-day negative run. We've given back most of what we got last week.

The economy is still in a shambles, but just as nothing goes up in a straight line, nothing comes down in a straight line, either. There are inevitable plateaus, and every plateau looks like a potential bottom, especially to a population starved for good economic news. In the macro sense, I hate to say this, but in the mortgage rate sense, I'm happy to report, that the economy is still moving the wrong way and doing so with some rapidity. We are not at the bottom yet. Repeat. NOT at the bottom yet.

Look for rates to make a small rise here, then drift back to where we were last Thursday, or even a skoshe lower.

Cj

Chris Jones

City 1st Mortgage Services

801-310-3407

RateWatch - It was the best of times, it was the worst of times...

Markets: Doing well again today. Yesterday broke the string of 5 straight days of rising bonds and falling rates (we have never had, in the years I have been following this, 6 green days in a row, so it was expected), and today we've continued the trend of the past week. Rates continue to improve. We're very close to some exciting things in mortgage rates. Stay tuned.

Analysis: Folks, the economy is in the soup. The things that got us here didn't happen in four months, and they're not going away in four months, either. This morning @agentopolis (I love Twitter) put me on to this article about unemployment, predicting that we'll see it hit roughly 14% in the coming months. I heard a very convincing analysis last night that put the CURRENT unemployment rate at 20% right now, if you count everyone, which the government numbers do not.

Do not worry about this. You cannot stop any of it. Work hard. Do your job. If you lose your job, it happens. Call me and tell me. I know people. We're doing things. We'll help you if we can.

Find someone worse off than yourself - this will not be hard - and help them. There's no better cure for recession than a lot of people working hard to help each other. No, let me amend that. There is no OTHER cure for recession than a lot of people working hard to help each other. Be part of the solution where you are, and let the markets do what they will.

Have a good weekend.

Cj

RateWatch - Hmmmmm. Interesting.

Market: We're up 19 bps so far today, picking up 3 bps every 45 minutes or so. Slow movement on heavy volume. That's pushing us back into the low 5% range on rates.

Analysis: This is really quite interesting. The government auctioned off $8 billion in 10-year notes this morning and the demand was very solid, both domestically and internationally. There was more money out there in that auction than there has been in years. That's a much different result than the auction of two weeks ago, let alone the one a month ago, which was disastrous. What it means is that there is a good deal of pressure in the market forcing bonds higher, and if you've been paying attention, and of course you have, you know that bonds moving up means rates moving down.

But it's more than that. Just the bond level is not entirely indicative of where rates are going to be. There's also the question of risk and liquidity on the bank side. The more liquid bank assets are, the lower they can set rates without exposing themselves to rate risk. As the credit markets froze up last year, banks had to raise rates to protect themselves, and had to chop programs until essentially only a-credit borrowers could qualify. It's too early to say that we've started the pendulum swinging back again, but today's auction was a thing that makes you go hmmmmmm.

We'll be keeping a close eye on the auctions later this week.

Cj

Chris Jones

City 1st Mortgage Services

801-310-3407

RateWatch - Local Boy Makes Good!

Market: As noted last week, rates have been drifting higher, but today has seen a reversal in the bond market and I would expect that we would get some of last week back. We're up about 35 bps, which is geekspeak for "about half of an eighth of a point" when lenders get around to giving it back to us. We've been frozen at this level all morning, so I don't think there's any real news making this push.

Analysis: We had a good-sized selloff in bonds last week, but honestly people, it's not as big a deal as CNN says it is. The MSM always trumpets a move in bonds - either direction - as a Sign of the Apocalypse or a Vision of the Rapture, and you just have to tune that stuff out. If the market moves dramatically, so that we're talking about a move of .25% or more, the big news will be something else, and any move in rates will be drowned in it, except here, because on RateWatch rates are all we care about. Seriously, there's no way Maria Bartiromo is watching the FNMA 4.0 30-year bond for indications of how the latest pirate attack affects your refinancing prospects. That's what I do.

If the talking heads are talking mortgages, that means there isn't any significant news moving things, which almost certainly means that the movement is tiny. Amplified and outsized by newsmedia, but it's a tempest in a teapot.

Tidbit: You can follow me on Twitter now (@chrisjoneslehi), and I got my first big hit today when @alphaconsumer, also known as Kimberly Palmer of US News and World Report, blogged about rates and points and cited yours truly. Kudos to @dellojoio (Enoch Chapman) for turning me on to the possibilities of social media. Utah mortgages may never be the same.