From the category archives:

Market Trends

Household Finances : Which Bills Should I Pay First?

by Bob Taylor Properties on July 8, 2010

Morning television can be “light”, but as far as personal finance interviews go, this Suze Orman segment from The Today Show is loaded with practical financial planning advice.

Titled “What Should You Do First?”, Ms. Orman addressed the real-life, money management conundrums households face, such as:

  • Should I pay off credit card bills, or create an emergency cash fund?
  • Should I pay off student loan debt, or pay off credit card bills?
  • Should I save for a child’s college tuition, or save for my retirement?

In 5 minutes, the segment covers a half-dozen scenarios like the ones above, explaining what to do, and why to do it.

Ms. Orman’s style may not interest you and financial advice is rarely universal, but the piece is worth watching.

Watch the clip on the NBC website.

 

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June’s Jobs Report Wasn’t As Bad As The Headlines (And How You Can Take Advantage)

by Bob Taylor Properties on July 7, 2010

Net Job Gains July 2008 - June 2010In June, for the first time since December 2009, the U.S. workforce shrank.

According to the Bureau of Labor Statistics, the economy shed 125,000 jobs last month even as the Unemployment Rate dropped to 9.5 percent. The drop in the Unemployment Rate is being attributed to fewer Americans looking for work.

At first glance, the jobs report looks weak but a deeper look shows something different.

Excluding the 225,000 government Census workers that recently left the workforce, the total number of employed persons actually grew by 83,000 in June. That’s 50,000 more working Americans as compared to May.

And, since the start of the year, the U.S. workforce has grown by 857,000.

Jobs growth is closely tied to economic growth because more working Americans means more disposable income which, in turn, stokes consumer spending. Job growth is better than job loss.

Consumer spending makes up the majority of the U.S. economy so as consumer spending grows, investor mentality tends to shifts toward “return on principal” (i.e. stock markets) from “safety of principal” (i.e. bond markets).

A move like this is often bad for home affordability because falling demand for bonds is tied to higher mortgage rates. In addition, with the growing number of Americans earning a paycheck, demand for homes is likely to increase, thereby helping to push home prices higher.

Overall, therefore, the jobs report should be bad for rate shoppers and home buyers in in Los Angeles. Except, the markets aren’t reacting that way. For now, mortgage rates are slightly improved since the jobs report’s release.

Perhaps Wall Street is watching the wrong figures, but don’t let that be your loss. If you’re shopping for a mortgage, a home, or both, now may be your best time to make a move; while rates are still low; with home prices down; before traders change their tune.

Because when markets change, it’ll likely happen fast.

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What’s Ahead For Mortgage Rates This Week : July 6, 2010

by Bob Taylor Properties on July 6, 2010

Unemployment Rate 2007-2010Mortgage markets improved last week as economic data revealed a slowing U.S. economy.

Major stock indices fell to 2010 lows in response to a weak jobs report among other data points, forcing worldwide investors into the relative safety of U.S. government-backed bonds.  This category includes mortgage-backed bonds and the extra demand helped to drop rates.

Once again, mortgage rates improved in CA and Freddie Mac is reporting new all-time lows on three popular, conforming loan products:

  • The 30-year fixed rate mortgage
  • The 15-year fixed rate mortgage
  • The 5-year adjustable rate mortgage

Low rates mean low payments and you can’t know your options until you ask.

This week, mortgage rates may move slowly. There’s very little data set for release because markets were closed Monday in observance of Independence Day, and because the second calendar week of a month is traditionally data-slow.

Tuesday, a consumer confidence study is published; Thursday, jobless claims plus consumer credit levels hit; and, Friday, we’ll see wholesale inventories.  That’s about it.  None of these reports are particularly important but, in aggregate, the numbers can show whether the economy is expanding or contracting.

In general, evidence of an expanding economy should cause mortgage rates to rise.  In a contracting economy, rates are likely to fall.

Actual mortgage rates will vary by borrower, based on property type, credit score, and home equity, but if you haven’t talked to your loan officer about a refinance into today’s rates, it’s likely worth the time for a phone call.  Once mortgage rates start to reverse higher, they’re expected to reverse quickly.

You’ll want to act before that move occurs..

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Was The Pending Home Sales Report Really That Bad? It Depends Who You Ask — Buyer Or Seller.

by Bob Taylor Properties on July 2, 2010

Pending Home Sales Nov 2008 to May 2010The Pending Home Sales Index plunged in May 2010, just one month after the expiration of the federal home buyer tax credit program.

The Pending Home Sales Index is now at a record-low level.

A “pending home sale” is an existing home under contract to sell, but not yet closed. According to the National Association of Realtors®, 80 percent of homes under contract close within 60 days.

Because of this timeline, we can expect the summer’s Existing Home Sales to be weak, too. With fewer homes going under contract, fewer homes can close.

On the surface, May’s Pending Home Sales Index looks like terrible news for housing. And, if you’re a seller, it just might be. But, if you’re a buyer, the story reads differently.  Just consider the market conditions. 

A broad look at the housing market shows:

  1. Home supplies are rising in most markets
  2. Home sales are falling in most markets
  3. Mortgage rates are at all-time lows

In other words, in most markets, more sellers are competing for fewer buyers, and the “winning” buyers are financing their homes at the lowest rates in history.

It’s an excellent time to be a home buyer in Los Angeles.

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The Year Is Half-Over. How Did The Housing Experts Fare On Their Predictions?

by Bob Taylor Properties on July 1, 2010

Housing and mortgage rate forecastsAs 2009 was ending, the “experts” were busy making forecasts about the U.S. economy and what to expect in 2010.

With respect to the housing markets, two predictions were made again and again:

  1. Home prices would fall in the first half of 2010
  2. Mortgage rates would be higher in 2010

Well, it’s July 1 and the year is half-over.  Both predictions are proving to be incorrect. Home values are rising in most markets and mortgage rates are down. Way down. 

It reminds us that economists are much more skilled with analysis of the past versus predictions of the future.

A pile of data can only get you so far.

Think of Los Angeles housing market predictions like watching a local weather forecast. A meteorologist can look at the radar and tell you that rain is coming, but it’s never with 100% certainty.  There is always a chance of change.

The housing market is the same way.  Just as the U.S. economy is unpredictable, so are housing prices, and so are mortgage rates. 

Therefore, when you have a personal finance decision to make, evaluate your options based on the information at hand today rather than an educated guess about the future. The future, after all, is subject to change — despite what the experts forecast.

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The 1 Force That Can Really Change A Mortgage Rate

by Bob Taylor Properties on June 29, 2010

Inflation and mortgage ratesAll day, every day, conforming and FHA mortgage rates in CA are in flux.  Rates move in response to hundreds of factors which exact varying levels of influence.

Among the biggest influences on mortgage rates is inflation.  When inflation is unexpectedly high, mortgage rates tend to rise quickly. Conversely, when inflation is unexpectedly low, rates tend to fall quickly.

But what is inflation?

By definition, inflation is when a currency loses its value; when what used to cost $1.00 now costs $1.10.

As consumers, we recognize inflation by the items we buy on a daily basis becoming more expensive.  However, it’s not that goods are more expensive — it’s that the dollars we’re using to buy them have become worth less.

With respect to mortgage rates, this is a big deal because mortgage rates are directly related to the price of a special type of bond called a mortgage-backed bond.

On Wall Street, mortgage-backed bonds are priced, bought, and sold in U.S. dollars so as inflation renders those dollars less valuable, so it does to mortgage-backed bonds as well. It’s a chain reaction by which mortgage bonds lose value, leading investors sell them, causing bond prices to fall on the excess supply.

And, because mortgage rates move opposite of bond prices, as inflation takes hold, mortgage rates rise.

Lately, inflation has been exceptionally low. The Federal Reserve acknowledged as much in its last statement to the markets, and available data backs that position.  This, after predictions that inflation would be “runaway” in 2010.

The Cost of Living is up just modestly this year and it’s helping mortgage rates stay low. And, so long as it lasts, the cost of owning a home in Eagle Rock will remain relatively inexpensive.

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