Federal Reserve to Keep Rates Near Zero

The Fed acknowledged today that an economic recovery was under way, but signaled that it was still too early to start raising interest rates.

In their statement following a two-day meeting by the Federal Open Market Committee, the central bank repeated that it would keep its benchmark overnight interest rate at virtually zero for "an extended period." This almost certainly means until at least some time in 2010. They also announced that they would extend the Fed's program to buy up almost $1.5 trillion worth of mortgage-related securities through the end of March.

Robert Frost

The brain is a wonderful organ.  It starts working the moment you get up in the morning and does not stop working until you get into the office.    Robert Frost (1874 - 1963)

Home Price Index

As far as economic reports go, it's another thin day - with one interesting and relatively new report to be aware of. At 10:00am ET, the Federal Housing Finance Agency released their "Housing Price Index" for the month of July. This report is a broad measure of single family home prices, and it includes data gained from both purchases and refinances that have taken place with Fannie or Freddie securitized loans since 1975. While this is not a new report, it has never gotten much attention…but with many eyes watching the health of the housing sector, it is starting to garner some interest. The Home Price Index showed that home prices on a national level declined by 4.2% in the past year, but rose by 0.3% from June to July. This is somewhat comforting, as it is pretty close to what the other reports have been telling us about the housing market.

FOMC Meeting Begins Tomorrow

The Fed starts it's 2-day FOMC meeting tomorrow with a statement coming on Wednesday afternoon at 2:15pm ET. We believe that there will be no change to the Fed Funds Rate currently standing at .25%, pegging the Prime Rate at 3.25%. The big discussion among members will be when the Fed will start to pull back on efforts to support the banking system, as well as lowering home loan rates by the purchasing of mortgage-backed securities.

Current Programs - September 17, 2009

-The $8,000 First Time Home Buyer tax credit is set to expire on 11/30/09. If you are a First Time Buyer now is the time to take advantage of this credit and lock in a rate at all time lows

-FHA programs with as little as 3.5% down payment

-Conventional Loans with rates at the lowest levels of all times

-Jumbo Loans up to $3,000,000 including: Fixed Rate Mortgages, Adjustable Rate Mortgages and Interest Only Loans

-Free Pre-Approvals and Second Opinions to ensure you get the best deal

-Non Jumbo Rates for loans up to $729,750 in some areas. Please contact me to see if your home is located in an area that benefits from this short term increase

-FHA Streamlined Programs for those who currently have an FHA loan. In many cases with this option an appraisal is not required so even if values have dropped you will still be able to take advantage of current rates

-Fannie Mae Refinance Plus Program. This is for those who currently have a Fannie Mae insured loan. This is a great product for areas where values may have declined as it will allow you to go to 105% of the current value of the home with no mortgage insurance. Please contact me to see if you are eligible for this program

-Jumbo Loans up to $3,000,000 including: Fixed Rate Mortgages, Adjustable Rate Mortgages and Interest Only Loans

Housing Starts Improved - Bonds and Mortgage Rates Improved

Housing Starts for August rose to 598,000 – better than the 583,000 expected and the highest level since last November – while Building Permits came in at 579,000, a bit shy of the 583,000 expected. All in all, a decent report, suggesting that while we are not out of the woods just yet, the worst in the housing market may have passed.

Warren Buffett - US Economy Bottomed Out

Stocks are at 2009 highs and are getting a boost this morning on positive comments from billionaire investor Warren Buffet, who remarked that the US economy has bottomed out. He went on to say that the we are also through the worst of the residential housing decline. This echoed comments made yesterday by Fed Chair, Ben Bernanke, who said that the recession is likely over.

Core Inflation at Wholesale Level Tame

Meanwhile, U.S. producer prices rebounded sharply last month on the back of rising gasoline and other energy costs, though core prices posted only a slight gain. The producer price index for finished goods rose 1.7% on a seasonally adjusted basis in August, after falling 0.9% in July.

Retail Sales Rose 2.7% in August

U.S. retail rose 2.7% in August, exceeding Wall Street's expectations for a 2% jump, as car dealers got a big boost from the government car-rebate program and other merchants fared well, too. Excluding autos, all other retail sales increased 1.1%.

MMG Weekly: Home Buyers - Prepare for Action

 

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Provided to you Exclusively By David W. Black,      First New England Mortgage, Aberdeen Mortgage, FNE Mortgage   David W. Black President First New England Mortgage Office: 617-641-6827 Fax: 617-219-1918 E-Mail: david@fne.com Website: www.fne.com Blog:    http://fneblog.blogspot.com/ Twitter: http://twitter.com/fnemortgage

 

For the week of Sep 14, 2009 --- Vol. 7, Issue 37

 

 

Last Week in Review

 

 

"BEFORE ANYTHING ELSE...PREPARATION IS THE KEY TO SUCCESS." Alexander Graham Bell. Very true words - and preparation is especially important these days, as several circumstances will make this fall a particularly successful time for prepared home buyers. Rates for home loans remain low - but it won't last forever. The Fed continues on their purchasing plan of Mortgage Backed Securities, and the added demand has kept Bond prices high and home loan rates low. Last week, they purchased another $32.4B, bringing the total to $849B out of the $1.25T they committed to. While these Fed purchases have helped home loan rates stay near present low levels, remember that their buying program is set to be over near the end of the year. There is talk that the program will be extended - but there has also been talk that it will end early - so nothing is a guarantee, except for the fact that when the Fed purchasing program is over, home loan rates will assuredly rise. In addition, given the current expiration date of November 30, 2009 for the $8,000 First Time Homebuyer credit, it's important for homebuyers to get prepared, and take action. In fact, many homebuyers are doing just that already. The Mortgage Bankers Association reported that home loan applications surged in the latest week to their highest level since late May, as more buyers are seeing the great opportunity that exists right now. Let me know if I can answer any questions for you, or perhaps a friend, family member, neighbor or coworker that might be thinking about a home purchase. The combination of reduced home prices, motivated sellers, low home loan rates, and the potential of a juicy tax credit is too great an opportunity to miss. The Stock market is doing well - and as you can see in the chart below, the S&P 500 Index closed at its highest level of 2009 last Thursday. The S&P 500 is a basket of 500 Stocks that are considered to be widely held, and is considered by most market experts as one of the best benchmarks available to judge overall US Stock market performance. ----------------------- Chart: S&P 500 Index In other economic news, Consumer Sentiment came in stronger than expected and Initial Jobless Claims were also reported better than expected, but still at a high level. Continuing Claims, which represent the number of people still receiving unemployment benefits, dropped a bit, but this realistically may be due to benefits expiring rather than people finding new jobs. PREPARATION IS ESPECIALLY IMPORTANT WHEN IT COMES TO EMERGENCIES! AND SINCE SEPTEMBER IS "EMERGENCY PREPAREDNESS MONTH", CHECK OUT THIS WEEK'S MORTGAGE MARKET VIEW FOR SOME IMPORTANT TIPS ON SURVIVING EMERGENCIES INTACT.

 

Forecast for the Week

 

 

Be prepared for a jam-packed week of economic reports ahead! Tuesday brings both the Retail Sales Report, which is the most-timely indicator of broad consumer spending patterns, and the Producer Price Index (PPI), which provides information about inflation at the wholesale level. There will also be more inflation news coming on Wednesday with the Consumer Price Index (CPI). CPI is an important measurement of inflation (and deflation) because it measures the average prices paid by consumers for goods and services, and what the change is in those prices over time. And things won't slow down then...Thursday will bring a read on the housing market with the Housing Starts and Building Permits Report, followed by a read on manufacturing with the Philadelphia Fed Report, which is one of the most widely-watched manufacturing reports. Thursday will also bring another Initial Jobless Claims Report. This weekly report continues to be important to watch as the job market plays a key role in our economic recovery. 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. As you can see in the chart below, Bonds have been able to remain above a key technical support level, and I'll be watching closely to see if Bonds and rates continue to improve. Chart: Fannie Mae 4.5% Mortgage Bond (Friday Sep 11, 2009)

 

The Mortgage Market View...

 

 

BE PREPARED FOR EMERGENCIES Are you prepared in the event of an earthquake, tornado, blackout, or worse? No one ever expects to be in an emergency situation - but those who have, generally wish they had been better prepared. September is National Preparedness Month, and the Department of Homeland Security's Federal Emergency Management Agency (FEMA) want to make sure you're prepared in the event of an emergency such as a flood, tornado or blackout. Hopefully you'll never be faced with an emergency situation of your own, but if you are, having an emergency kit will help ensure that you and your loved ones will have the bare necessities such as food, water, and items to keep you warm. Determining all the right items for each member of your family, your pets, and those with special needs could normally be a very grueling process - but thanks to FEMA's http://www.ready.gov website, it's easy! To help you get started preparing your emergency kit, FEMA has developed a user friendly website that allows you to download and print all of the items that you will need to gather for an Emergency Kit. Simply visit the special Emergency Kit webpage for a quick list of the basic emergency items you need to have on hand, as well as additional items you should consider adding to your kit. Take a few minutes to visit the site, and forward this article on to your friends, family members, and colleagues. Or better yet, prepare a starter kit for them as a gift while you're preparing one for yourself. That way, when the power snaps off unexpectedly - or worse - you won't be caught off guard.

 

The Week's Economic Indicator Calendar

 

 

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise. Economic Calendar for the Week of September 14 - September 18 Date ET Economic Report For Estimate Actual Prior Impact Tue. September 15 08:30 Core Producer Price Index (PPI) Aug 0.1%   -0.1% Moderate Tue. September 15 08:30 Producer Price Index (PPI) Aug 0.8%   -0.9% Moderate Tue. September 15 08:30 Retail Sales Aug 1.6%   -0.1% HIGH Tue. September 15 08:30 Retail Sales ex-auto Aug 0.5%   -0.6% HIGH Tue. September 15 08:30 Empire State Index Sept NA   12.08 Moderate Wed. September 16 10:30 Crude Inventories 9/11 NA   -5.91M Moderate Wed. September 16 09:15 Industrial Production Aug 0.7%   0.5% Moderate Wed. September 16 09:15 Capacity Utilization Aug 69.1%   68.5% Moderate Wed. September 16 08:30 Consumer Price Index (CPI) Aug 0.4%   0.0% HIGH Wed. September 16 08:30 Core Consumer Price Index (CPI) Aug 0.1%   0.1% HIGH Thu. September 17 08:30 Building Permits Aug 570K   564K Moderate Thu. September 17 08:30 Housing Starts Aug 588K   581K Moderate Thu. September 17 08:30 Jobless Claims (Initial) 9/12 NA   550K Moderate Thu. September 17 10:00 Philadelphia Fed Index Sept NA   4.2 HIGH

 

The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is not without errors.   As your trusted advisor, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.   In the unlikely event that you no longer wish to receive these valuable market updates, please USE THIS LINK or email:  david@fne.com   If you prefer to send your removal request by mail the address is:   David Black First New England Mortgage 180 Wells Avenue Newton, MA 02459 First New England Mortgage, FNE, Aberdeen Mortgage - Licenses   Massachusetts MB5239 Colorado No License Required New Hampshire Licensed by the New Hampshire Banking Department Connecticut First Mortgage Lender/Broker #0001925 Maine Supervised Lender SLM6916 Arizona Mortgage Banker BKBR - 0107550 Rhode Island Loan Broker License Number 20031586LB Colorado Licensed at Loan Officer   Mortgage Success Source, LLC is the copyright owner or licensee of the content and/or information in this email, unless otherwise indicated.   Mortgage Success Source, LLC does not grant to you a license to any content, features or materials in this email.   You may not distribute, download, or save a copy of any of the content or screens except as otherwise provided in our Terms and Conditions of Membership, for any purpose.

 

Fed Purchases Have Helped Keep Rates Low - This May End

In Fed MBS buying action, the New York Fed purchased $32.4B in Mortgage Backed Securities last week, bringing the yearly total to $849B out of the $1.25T they committed to. The Fed purchases have helped home loan rates to stay near present low levels – but remember that their buying program is set to be over near the end of the year.

Employment Opportunities at First New England Mortgage

We are excited to be hiring new Loan Officers for our Newton, MA and Scottsdale, AZ offices.  We offer a very competitive compensation plan, a safe business structure poised for growth, and many state-of-the-industry products including FHA.  Call or email to discuss this exciting opportunity.  If you know anyone in the financial services industry or in sales in general, your referral would be appreciated.

Fishing in Illegal Waters

Give a man a fish and he will eat for a day. Teach a man to fish and he will eat for a lifetime. Teach a man to create an artificial shortage of fish and he will eat steak. - Jay Leno

Mortgage Rates Low - Applications Rise

The Mortgage Bankers Association reported that mortgage applications surged in the latest week to their highest level since late May, as home loan rates hover near multi-month lows and as prospective buyers try to take advantage of the $8,000 tax credit before it expires at the end of November. We’ve discussed the likelihood of a false bottom in the housing market, due to accelerated buying prior to the expiration of these tax credits, along with the Fed’s MBS purchases. There is talk of both the tax credit and the MBS purchase program being extended – but there’s no guarantee. In the meantime, it’s a good reason for First Time Homebuyers get off the fence, as recent stats show that many buyers are still unaware of the credit, or don’t understand what it means for them. The National Association of Realtors has started to run television commercials promoting the tax credit, which is likely helping increase awareness as well.