Moved, But Not Moved On

Since Blogger is forever, I don't want to get rid of this blog, but we have long since moved on to greener pastures, first at www.lehilender.com, and now at www.lehimortgages.com. We very much hope you'll come visit us there.

Blessings on your head.

RateWatch - Something Odd Going On

Market: We're flat, as in 0bps movement, so far today. We've been trading in a narrow range, with a push to the upside on bonds (down on rates) for a few days now. I find this exceedingly odd, and will attempt to explain why. Rates continue 5.25% or thereabouts on the 30-year, lower (and MUCH lower sometimes) on ARMs, which yes, are still out there and making good sense for many.

Analysis: This is a tough market to read. We are sitting right on the 100-day moving average (and the 200-day moving average). For weeks, every time we touched that line, we retreated strongly. Any news, even bad news, was interpreted in the most positive possible light, and bonds sold off. The stock market is strongly up since March, and though bonds have not fallen by the same amount, the general consensus (here, too) has been that rates were trying to rise and that it was only a matter of time before we saw 6% and higher again.

Well, now I'm not so sure. This is very odd behavior for the market. The last couple days there has been some decent economic news, home sales higher, Case-Schiller index higher in 95% of the measured markets, consumer confidence much higher than expected, durable goods orders higher (but with embedded weakness), and ordinarily this would mean a selloff in bonds, especially as we're right at the top of a trading range. And yet, and yet. We even had a huge 5-year treasury auction yesterday, but the bond market actually ROSE following that auction.

So here's my interpretation at the moment: I think there is a nagging suspicion in the market that there is some really, really negative news coming. I think there's a fear that this summer was irrationally exuberant in terms of calling an end to the recession. I think that means that we're going to hang out right here on interest rates until at least the $8000 first-time homebuyer credit goes away (loans must be CLOSED by November 30).

That's my read. I could be wrong. I'm holding out at least a 25% chance that there could be a big move down in rates before the end of the year. I also wouldn't be surprised to see a large move upward. But if I were betting, and hey, that's kind of what I do here every day, I'd bet on holding right here.

Cj

Chris Jones

City 1st Mortgage Services

801-310-3407

P.S. For you duplex buyer mortgage shoppers, just wanted to say that you'll need to be in underwriting (for conventional financing) by Monday unless you want to put 20% down. 80% becomes the loan limit on all duplexes as of Tuesday Sept 1. Just a word to the wise.

RateWatch - Waitin' on the World to Change

Markets: Nothing much happening for the last few days. Up a bit, down a bit, with the general trend toward up. Rates still hanging out in the 5.25-5.375% range.

Analysis: It's the end of summer, and nobody is home. There is a lot of data coming out tomorrow, and there will be especial attention paid to existing home sales and initial claims. Mortgage shoppers, watch for that data to be better than expected, and for rates to move higher on very weak volume. Next week most traders will be back at their desks, but the real long haul of the final third of the year won't start until after Labor Day.

Only 126 shopping days left until Christmas. Just FYI.

Cj

Chris Jones

City 1st Mortgage Services

801-310-3407

RateWatch - What Goes Down Must Come Up

Market: following last week's meltdown, we were due for move movement higher in the bond market, and we've been getting it all this week. Today we're up a modest 25bps, but that follows three out of four days of decent gains. We're not back to two weeks ago, but we're not far off it. Still at about 5.25% on the FHA, with conventional in that range as well, depending on, as you know by now, several dozen factors.

Analysis: markets are funny things. They'd be much more predictable if they weren't being operated by humans, who tend to overreact to everything. When economic data is less negative than expected, they buy things really fast, which leads to selling them equally fast when data is less positive than expected. Right now, it appears the economy is starting to bottom out, or at least the rate of descent is slowing. But it never slows in a gentle curve; there are bumps and bruises along the way. Those bumps are what we're seeing now. It's keeping rates generally down, and allowing us to lock on the dips.

Apropos of this, let me remind everyone that being able to lock your rate is a function of having a great deal of information about your loan already in the system when the opportunity presents itself. Don't be cavalier about this. Especially in the current regulatory climate, I need far more data about what we're doing with the loan than I once did. If I have it, I can lock very fast. If I don't, I can't lock at all. The best defense against losing your sought-for interest rate is to work with me to get you into a lock-ready position, then we can pull the trigger at the best time for you.

Cj

Chris Jones

City 1st Mortgage Services

801-310-3407

P.S. I just inked a contract with Scotsman Guide, one of the industry's oldest magazines, to write some articles for them. When they come out, I'll post a link, but they've accepted two articles so far, so be watching.

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 - We Control the Market

Market: We got hammered today because...well, because. We're down 59bps at the moment, and you can thank us here at the Chris Jones Branch of City 1st that it isn't worse. It was worse, but we fixed it. I will tell you how below. This translates to a rise in rates of .25% over the past two days.

Analysis: Employment numbers came in right in line this morning, followed by home sales numbers that are so anemic they'd be confined to bed in any other market. The stock market euphorically rose to over 9000 on this news. Whatever. Who can analyze this stuff?

But I know how to control it. This has been tested so many times now that it's as good as proved. We know here at the office that when we lock a loan, we reverse the market (this only works when the market is tanking). In the last two weeks we've done it several times. The market starts to fall, so we call up one of our loans and lock it. The second we do, the rally begins. Happens 100% of the time.

Why didn't we do something about the terrible crash of Black Wednesday two months ago? Funny you should ask. We TRIED. Lenders stopped accepting locks, so we couldn't get one down. We sent in the request, and it was eventually honored - at the open of the market the next day, which sparked the largest up day for bonds in several years. I'm telling you, it's a curse having this much responsibility.

But I promise you I will use it with discretion and wisdom. I also promise that your personal loan will not be the one we sacrifice on the altar of the gods of mortgage rates. We'll get someone else.

Cj

P.S. Thought I'd again thank all of you for following me, and let you know that it matters a great deal to me. Today I picked up a gig writing for the Scotsman Guide, somewhat because of RateWatch. You are all very important to me, and you do get service that's not available to just anyone. Thank you again, and welcome to our new signups. Hope you like it here.

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