Friday’s Jobs Report from the Bureau of Labor Statistics was a big market mover, showing that 80,000 jobs were created in October, which was just slightly below expectations. In addition, 104,000 private sector jobs were created, also just below expectations while the unemployment rate dropped to 9%, from a previous reading of 9.1%.A big positive in the report was once again upward revisions to prior month’s readings, which showed 102,000 more jobs created in the two previous months than what was originally reported.

The takeaway from the report is that it doesn’t appear the economy is slipping into another recession…at least not yet. The labor market continues to create jobs, but at a very slow and uneven pace. Until we see significant job growth–north of 150,000 each month, for a sustained amount of time–we won’t see meaningful improvement in the economy or the unemployment rate. This turn means that rates should continue to hover at low levels, albeit in a volatile fashion.

Also limiting how high our rates can go is the ongoing European drama. The removal of the referendum (Greek Prime Minister George Papandreou had announced he would put the Euro rescue plan to a referendum or vote amongst the Greek people) is one piece of uncertainty taken away from the market–and that was a big one. However, there are still so many things that can and probably will go wrong until the European leaders put a big, realistic, attainable solution into action. For instance, Italy’s Bond yields continue to inch higher, suggesting that their debt problems won’t easily be solved and continue to creep towards an unmanageable state.

Plus, Fed Chairman Ben Bernanke said Wednesday during his speech after the regularly scheduled meeting of the Federal Open Market Committee that purchases of Mortgage Bonds are being considered–which is another factor that could benefit home loan rates.

Here are mortgage rates for the beginning of this week….

 Conventional 30 Yr. Fixed:  3.95%

Conventional 15 Yr. Fixed:  3.875%

Conventional 5/1 ARM: 2.75%

FHA/VA 30 Yr. Fixed:  3.75%

FHA/VA 5/1 ARM:  3.50%

Jumbo 30 Yr. Fixed:  4.625%

Jumbo 5/1 ARM:  2.875%

Forecast for the Week

While the Stock Markets are open Friday, the Bond Market will be closed in honor of Veterans Day. And with fewer economic reports this week–and with earnings season essentially behind us-the Bond Market will take direction from a number of factors.

•The first major report will be released on Thursday when Weekly Jobless Claims are reported. Last week’s report showed that weekly claims fell below 400,000 to 397,000, which was better than the 401,000 that was expected.

•The markets will also get a new read on how American consumers feel about the economy with the Consumer Sentiment Index on Friday.

In addition to those reports, the headlines coming out of Europe will continue to influence the markets here in the US, including Bonds and, as a result, home loan rates. Also, this week’s Treasury auctions totaling $72 Billion could be a big market mover, depending on how they’re received.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

Bonds and home loan rates were able to take advantage of the decrease in Stocks last week, due in part to the uncertainty out of Europe. I’ll be monitoring this situation closely in the weeks ahead.

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People say that “life is full of surprises.” And indeed, last week’s Jobs Report contained several surprises. Read on to find out if they were good or bad…and what they meant for home loan rates.

Overall, the Jobs Report wasn’t great, but it did surprise by being better than anticipated. One thing that wasn’t a surprise was the unemployment rate which held steady at 9.1%. But the headline number came in at 103,000 jobs created, which was better than expectations of 60,000 and even higher than some of the more frothy expectations. In addition, 137,000 jobs were created in the private sector, which offset more government job losses and which was a lot better than the 83,000 private job gains expected.

Another surprise in the report was the significant upward revisions, which added 99,000 jobs to what was previously reported in prior months, and this added to the positive tone of the report. These upward revisions really change a very pessimistic jobs picture to something a bit more optimistic. For instance, last month the Jobs Report showed zero job creations and now that figure has been revised to show 57,000 jobs created. Once again, these aren’t great numbers—but they are better than bad, and they tell us that the economy is not in a recession…at least for now.

So, what did all of this mean for home loan rates? It’s important to remember that when our economy is struggling, our Bond Market usually benefits as investors seek a safe haven for their money. And since home loan rates are tied to Mortgage Bonds, our home loan rates are sometimes at their best when our economy is struggling. In a way it makes sense…in times of economic struggle, good home loan rates can help kick start our economy in other areas.

Yet, when good or better than expected economic news hits the wires, like it did with Friday’s Jobs Report, investors often move their money out of Bonds and into Stocks in an attempt to take advantage of these gains. And that’s a big reason why we saw Bonds and home loan rates worsen a bit this week.

As of today (Thursday, October 13th) rates are still great:

Conforming

30 year fixed: 4.125%

15 year fixed: 3.50%

5/1 ARM: 2.875%

7/1 ARM: 3.375%

Government

30 year fixed: 3.75%

5/1 ARM: 3.50%

Jumbo

30 year fixed: 4.875%

5/1 ARM: 3.25%

The most important thing to remember is that now is still a great time to purchase or refinance a home, as home loan rates remain near historic lows.

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 In July, mortgage rates set a new record low as consumer confidence softened and unemployment remained elevated. This presents a great opportunity for buyers and investors. Coupled with lowered home prices and a robust rental market, investors are finding their way to cash-flow opportunities. As recovery gains deeper roots, rates will need to rise to keep inflation in check. 

Rates as of August 6.

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Fannie Mae actually launched a website this week that is surprisingly helpful and informative. http://www.knowyouroptions.com It is a simple question and answer type flow chart that you can use when considering the emotional and critical decision of a short sale or foreclosure.

Rates are also at an incredible low. If you are considering buying this year, now is the time to call and let me help you experience moving forward!

Call me today at 503-504-0083. We are licensed in Oregon.

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“The average rate for a 30-year fixed loan sank to 4.69 percent this week, beating the low set in December and down from 4.75 percent last week, Freddie Mac said Thursday. Rates for 15-year and five-year mortgages also hit lows.” AP

For the entire article: OregonLive.com

 There is a large inventory of homes on the market in our area. Now is the time to take advantage of this opportunity to buy into historically low rates. Call me at 503-504-0083 to find the right home at the right price for you!

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FANNIE MAE is changing the “waiting period” (i.e. the amount of time that must elapse after the preforeclosure or short sale event) before home buyers can qualify for a loan. Several factors will impact these changes, including the required down payment or loan to value (LTV) for the transaction and whether extenuating circumstances contributed to the individual’s financial hardship (e.g. job loss). Charts under SEL-2010-05:

 CLICK this link for the full announcement from Fannie Mae.

The bottom line - Buyers who have experienced a short sale or deed in lieu of foreclosure may be elibigle for financing sooner than previously expected.

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THURSDAY, APRIL 29, 2010
Forbes Magazine recently published “Tomorrow’s Real Estate Trouble Spots” and the Portland area market ranks 3rd in the nation on their top 10 list of real estate with severe downside risk going forward. Eugene-Springfield ranks 9th in the nation on the list:

“While metros like Miami, Las Vegas and Los Angeles have gained notoriety for plummeting home prices, it’s not those markets that have the most to worry about now. These new housing trouble spots, most of which saw home prices peak after the national average, are set to see major price corrections in the next year. To identify them, Local Market Monitor, a Cary, N.C.-based real estate research firm found the Metropolitan Statistical Areas where it forecast the biggest average-home-price drops in the next 12 months”

As many have noted, Portland was late to the housing bubble party by two years, but it will not avoid the hangover -regardless of the “urban planning” argument tossed around by so many. Even those from the NW interviewed in the Forbes article throw it up like a magic shield that will prevent bad loans from ever defaulting. Hipster influx be damned. Jobs, wages, and real cash flow are all important now that the magic potion of easy real estate loans has vaporized.

The Forbes not so rosy conclusion: Portland’s real estate market has another 31% to drop from here, and we will see prices drop 9% in the next 12 months alone. The Eugene-Springfield market has another 21% to decline, and can expect an 8% hair cut in real estate prices over the coming year.

For those who’ve been paying attention, much of this decline will be predicated by the plethora of Alt-A and Option-ARM loans originated in the NW between 2005 and 2007. The majority of these types of loans have a 5 year reset/recast built into the original mortgage. Expect Portland’s market to go from bad to worse between 2010 and 2012 as a result.

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Alex Veiga, AP Real Estate Writer, On Thursday April 15, 2010, 12:34 am
LOS ANGELES (AP) — A record number of U.S. homes were lost to foreclosure in the first three months of this year, a sign banks are starting to wade through the backlog of troubled home loans at a faster pace, according to a new report.
RealtyTrac Inc. said Thursday that the number of U.S. homes taken over by banks jumped 35 percent in the first quarter from a year ago. In addition, households facing foreclosure grew 16 percent in the same period and 7 percent from the last three months of 2009.
More homes were taken over by banks and scheduled for a foreclosure sale than in any quarter going back to at least January 2005, when RealtyTrac began reporting the data, the firm said.
“We’re right now on pace to see more than 1 million bank repossessions this year,” said Rick Sharga, a RealtyTrac senior vice president.
Foreclosures began to ease last year as banks came under pressure from the Obama administration to modify home loans for troubled borrowers. In addition, some states enacted foreclosure moratoriums in hopes of giving homeowners behind in payments time to catch up. And in many cases, banks have had trouble coping with how to handle the glut of problem loans.
These factors have helped slow the pace of foreclosures, but now that trend appears to be reversing.
“We’re finally seeing the banks start to process the inventory that has been in foreclosure, but delayed in processing,” Sharga said. “We expect the pace to accelerate as the year goes on.”
In all, more than 900,000 households, or one in every 138 homes, received a foreclosure-related notice, RealtyTrac said. The firm based in Irvine, Calif., tracks notices for defaults, scheduled home auctions and home repossessions.
Homeowners continue to fall behind on payments because they’ve lost their job or seen their mortgage payment rise due to an interest-rate reset. Many are unable to refinance because they now owe more on their loan than their home is worth.
The Obama administration’s $75 billion foreclosure prevention program has only been able to help a small fraction of troubled homeowners.
About 231,000 homeowners have completed loan modifications as part of the Obama administration’s flagship foreclosure prevention program through March. That’s about 21 percent of the 1.2 million borrowers who began the program over the past year.
But another 158,000 homeowners who signed up have dropped out — either because they didn’t make payments or failed to return the necessary documents. That’s up from about 90,000 just a month earlier.
Last month, the administration expanded the program, launching a plan to reduce the amount some troubled borrowers owe on their home loans and give jobless homeowners a temporary break. But the details of those programs are expected to take months to work out.
The states with the highest foreclosure rates in the first quarter were Nevada, Arizona, Florida and California, with Nevada leading the pack, RealtyTrac said.
Rising home prices and speculation fueled a wave of home construction there during the housing boom. But now the state, particularly around the Las Vegas metropolitan area, is saddled with a glut of unsold homes.
Still, the number of homes in Nevada that received a foreclosure filing dropped 16 percent from the first quarter last year.
All told, one in every 33 homes in Nevada was facing foreclosure, more than four times the national average, RealtyTrac said.
Foreclosure filings rose on an annual and quarterly basis in Arizona, however.
One in every 49 homes there received a foreclosure-related notice during the quarter.
Florida, meanwhile, posted the third-highest foreclosure rate with one out of every 57 properties receiving a foreclosure filing.
California accounted for the biggest slice overall of homes facing foreclosure — roughly 23 percent of the nation’s total. One in every 62 properties received a foreclosure filing in the first quarter.

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