Weekly Comments and what my 7-year old taught me

Tangent: What my 7-year old taught me:

My 7 yr old, Merrick, has expressed his interest to run a lemonnade stand business this summer.  He went on to mentioned that he would like the money he makes from the 1st lemonnade stand to have more lemmonade stands and cookie sales.  It blew me away that this kid understands the concept of re-investing without ever hearing the term "re-invest".  He then went on to tell me about his idea to give his best customers a Wii video game at the end of the summer to thank them for being such good customers.....

In 13 years of mortgage lending, I never thought about a VIP program for the repeat business partners and their clients!? My seven year old conducts one lemmonade stand and figures this out!?  While I always felt that I worked hard to provide the best service I could and provide the most aggressive financial packages I could, I came to the realization that this should be implemented in my practice.  1 expect to roll out a program in the next 45 days that mirror's my son's...probably not a Wii video game though. 

Financial Markets

The Dow Jones saw its streak of 8 weeks of gains snapped on Friday, as it fell over 166 pts, and ended the day at 11,823.   The riots and political unrest in Egypt is deemed to be the scapegoat for sell-off in stocks.  I say scapegoat because many felt that the Dow had reached a “technical ceiling” at around 12,000, and that a pullback was inevitable. 

Commodities and of course the bond market reaped the benefits of the market shift, and mortgage rates generally speaking improved by about .125%.  The rise in the price of oil is getting notice for obvious reasons.  Oil is now trading for over $89 per barrell.  As gas prices increase, the cost of shipping goods increases therefore the cost of goods we buy increases, which is a catalyst for inflation.  

Local Economy and Real Estate Market

The number of foreclosures dropped in 2010 from 2009 by 19%, according to an article in the RJ.  Hubble Smith and Larry Murphy contribute the drop to loan modifications, a higher success rate of short sales getting approved and the Making Home Affordable Program as viable deterrents of foreclosures.

http://www.lvrj.com/business/foreclosures-decrease-in-2010-due-to-short-sales-and-modifications-114744519.html

Clark County taxable sales had a year-over-year increase for the month of November by 1%.  The report is another signal that the recovery in Nevada is continuing, but slowly.

http://www.lasvegassun.com/news/2011/jan/27/clark-county-taxable-sales-see-small-boost-novembe/

Products of mention to help you sell more homes:

·         FHA Choice Plus (Now, PRMI will allow FICO scores as low as 580)

·         95% conventional financing with FICO as low as 660

·         90% financing for 2^nd homes

·         90% financing for jumbo loans up to $600,000

 

Weekly Comments

Financial Markets
Stocks continue to climb this week, as the Dow gained another 100 pts in 4 days of trading.  Mortgage bonds continue to be sold, resulting in mortgage rates inching up.  In many instances, 30 yr fixed mortgage products require the buyer paying points in order to lock in at an interest rate south of 5%.  The weekly Jobless Claims Report was the primary catalyst for the stock market gain, as much of the week’s gains occurred after the report announced.  The weekly jobless claims dropped by 37,000 to 404,000, which was 20,000 less claims than expected.     


Local Economy and Real Estate Market
The Building Jobs Coalition has a proposed a program to the Nevada state legislature that would generate up to 27,000 jobs over the next two years, and over 100,000 a number of years later.  The program would be funded by minor increases in taxes.  Applied Analysis head Jeremy Aguero staunchly supports the plan and feels that it has a chance to become a reality.  The funds would go to various public works projects such as construction of roads, schools, and other government facilities. 
http://www.lasvegassun.com/news/2011/jan/20/construction-industry-raise-taxes-jobs/

Below is an article from the RJ that summarizes home sales in Southern Nevada for 2010.  In total, just over 48,000 home sales occurred, with 5,341 of those sales belonging to new homes. 
http://www.lvrj.com/business/las-vegas-new-home-sales-up-in-2010-resales-down-113916814.html

Program Change 

·   Primary Residential Mortgage will be rolling out its FHA program for buyers with less than a 620 FICO score in the next 30 days

·   We now offer 90% financing for buyers purchasing a 2^nd home

Primary Residential Mortgage continues to strive towards offering true agency guidelines, which enables its loan officers to assist home buyers that are getting declined by other lenders with extraordinarily conservative "overlays". 

Weekly update- No tangent this week

Financial Markets
The Dow Jones posted another strong week, closing on Friday over 11,730 which is up nearly 150 points for the week.  Mortgage backed securities inched higher for the week, but could have been much worse as inflation reports came in at a tame number.  December’s Consumer Price Index (CPI) increased .5%, but .4% of the increase was due to increased food and energy costs.  With food and energy costs backed out, the rate only increased .1%.  This loosely translates into an annual inflation rate of 1 to 1.5%.  The Federal Reserve’s ideal inflation rate would be probably somewhere around 3%. 

This upcoming week could be volatile for mortgage rates because many companies will be releasing their earnings for the 4^th quarter of 2010.  If earnings meet what was projected, we could see mortgage rates increase, as more investors look to move their money from the safe harbor bonds to the higher yielding stock market.  If earnings miss, the exact opposite will occur.    

Local Economy and Real Estate Market

The Center for Business and Economic Research released its Southern Nevada index of Leading Economic Indicators report for the month of December, and it saw an increase of nearly ½%.  This index is considered to be a predictor of job growth 4-6 months down the road.  Below is the link to the actual site and the report itself.

http://cber.unlv.edu/snindex.html#table

Tip of the Week:

Tax Returns

If you have a client that is considering purchasing a home, you may want to have them speak with your trusted loan officer before they file their tax returns.  Often minor tax write-offs such as: meals and entertainment, mileage, uniforms, tools for their trade etc result in a slightly higher tax rebate for your client, but could also be the difference in qualifying for a home loan.  There are many other examples in which a client’s filing will affect how an underwriter will review their income, so have them meet with your lender, before they meet with their accountant.

Program Change 

Primary Residential Mortgage is now able to offer 95% financing on conventional loans with a FICO score of 660!  PRMI recently re-engaged with a mortgage insurance company that has agreed to insure these loans in Clark County, and are now able to offer the product to your clients. 

"Should I spend or Should I Save Noooow"

I want to thank you all for allowing my team and I assist your clients this past year.  I wish you all the best of luck in 2011, and I look forward to working with you.  Happy New Year’s!

Financial Markets
It was another uneventful week for the Dow Jones, as it never dipped below 11,500 or surged higher than 11,650 at any point.  The bond market and in particular mortgage backed securities were a little more choppy, as we often saw multiple rate changes throughout the day almost every day, but the net result was flat as the 30 yr fixed rate mortgage still hovers in the upper 4’s. Mortgage backed securities had a rare rally on Wednesday, but gave it all back on Thursday.  The weekly initial jobless claims report was much lower than expected, which led to an exodus from bonds. 

Local Economy and Real Estate Market

Convention attendance for 2011 is expected to reach levels of 2005 and 2006, a healthy rebound from the dismal numbers of 2008 and 2009.  The article below sites corporate profits as the primary reason for the rebound.

http://www.lasvegassun.com/news/2010/dec/28/signs-meetings-surge-las-vegas/

Traditional visitor traffic is also expected to improve this weekend, with an estimated 320,000 visitors expected to travel to Las Vegas to celebrate New Year’s. 

http://www.lasvegassun.com/news/2010/dec/30/320000-revelers-expected-ring-new-year-las-vegas/

Success Story of the Week:

Primary Residential climbed the ladder on the RMS report, which ranks mortgage companies by volume for loans closed in Southern Nevada.  In just our 2^nd full month of being licensed, we ranked 31 out of 226 in Southern Nevada in closed loan volume!  (Queue the Jefferson’s theme song..Movin’ on up!)

The Tangent: “Should I spend or should I save Noooow….”

As a residential mortgage lender, my income is and will always be somewhat related to consumer spending.  As consumers open their wallets, businesses profit, expand, hire, new hires spend, which leads to additional business profits, additional expansion and additional hires.  In a market as hard hit as Las Vegas, with unemployment at 14%, nothing is more sorely needed than free-wheeling consumer spending.  Yet as of June of 2010, the average US consumer is saving 6.4%..The highest rate of savings rate since the early 1990’s…”  For the first time since the 70’s, we are actually out-saving the traditionally more conservative Canadians!

http://www.theglobeandmail.com/globe-investor/personal-finance/canadians-now-saving-less-than-us-consumers/article1662505/

While myself and the roughly 200,000 unemployed Nevadans could certainly benefit from some good ol’ fashioned drunken sailor American spending, I can’t help but be proud that as a whole the American consumer has taken the hard knock lessons of the great recession to heart and is showing that it has learned from past mistakes (myself included)

Attached is a link to a pie chart on what the average American spends their pay check on:

http://www.visualeconomics.com/how-the-average-us-consumer-spends-their-paycheck/

HAPPY NEW-YEEEAARR!!

Tangent: "Talkin 'bout my generation"

Financial Markets
The Dow Jones had a relatively uneventful week as light trading due to the holidays and economic reports released primarily meeting forecasts.  Consumer Confidence Index rose to its highest level since June.  Consumer Confidence Index is an indicator of potential consumer spending, with the thought being that if today’s Confidence Report is up, then consumer spending will soon follow.
The bond markets, and in particular, mortgage backed securities, for the most part experienced a neutral week in trading as well, as interest rates for a 30 yr mortgage over in the upper 4’s to low 5’s.      

Local Economy and Real Estate Market
November home sales data broken down into the following types of sellers are as follows:

·         Foreclosures = 41% (1,597 out of 3,916)

·         Short sales = 21% (822 out of 3,916)

·         Traditional Sales = 30% (1,187 out of 3,916)

·         Auction sales = 8% (310 out of 3,916).

49% of the purchases were sold to cash buyers.
(The data was derived from a recent article in the Las Vegas Sun, below is the link to the article in its entirety.) http://www.lasvegassun.com/news/2010/dec/21/housing-market-continues-slide-las-vegas/

Success Story of the week:

This past week, we were able to help a home buyer close on their home using FHA financing in 11 days, and 4 of the 11 days were weekend days!  This is not the norm, but when the stars align it can happen.   

Tangent: Talkin 'bout my generation

Technically, I am considered Generation Y according WiseGeek, but could also be considered Generation X.  I’ll tell you why, whatever you want to call it, X or Y, has it tougher than any other generation.  Granted, I didn’t have to walk 5 miles to school up a hill both ways in the snow, partially due to global warming, partially due to the fact that it would be impossible to walk up the hill both ways...But our generation has it tough in one regard.  With today’s technology, it is virtually impossible to keep your kids faith in the big fat guy in the red suit.  Last week we drove to “The North Pole” to ride the “Polar Express”, which is conveniently located in Northern Arizona.  As if it isn’t difficult enough with the boys having access to the internet, taking the bus to school with older kids that don’t believe, the fact that they are way smarter than I ever was at that age, I have to worry about the directional display on my rear view mirror.  On our way to the “North Pole”, my 5 year old wanted to know why we were heading South East…… Punk…..

Weekly comments. Tangent of the week: "The Sequel Sucked"

Financial Markets
The Dow Jones ended the week flat, at 11,499, as stocks saw very little volatility.  The bond market on the other hand, is where all the action was, and by action I mean selling. (As a reminder, bond market sell-off = increase in mortgage rates).  To recap the last 45 days, the FNMA 4.0% bond, which is the bond that directly translates into a mortgage rate for the consumer, has lost 700 basis points.  This loosely translates into about .875%!  The bond finally made back some ground today, but hardly made a dent in cleaning up the wreckage left behind. 
The two primary reasons for the sell-off in bonds are 1) Quantitative Easing 2 (QE2) and 2) Tax bill that was proposed several weeks ago, and signed into law today.  Both actions promote inflation and inflation is the bond market’s arch-nemesis.  Bond investors sell their positions when faced with inflation because the rate of return on the investment could then be lower than the rate of inflation.  Example, if a particular bond is yielding 3.5% and inflation is running at 5%, than the bond investment is essentially losing 1.5%.  So, the sell-off begins until the yield on the bond is believed to at least outpace inflation. 
Still awake?  Below is a link in the WSJ for some of the more pertinent announcements in the new tax bill.   
Wall Street Journal Tax Bill

Local Economy and Real Estate Market
Below is a link from the Las Vegas Review Journal, and…get ready for this….Las Vegas was ranked #3 out of 54 cities in……HOME PRICE APPRECIATION for the month of November.   That’s A-ppreciation…with an A… 
LVRJ Home Appreciation

Loan Program of the Week:

We recently rolled out our FHA 203k rehabilitation program.  This allows an FHA borrower to purchase a home that needs work and roll in the cost of the repairs.  This product works well for homes on the market that are a great value but need repairs that the seller is unwilling to make prior to the closing.  Please feel free to email me or call me for further details. 

The Tangent: “The Sequel Sucked”. 

On November 3^rd, The Fed Reserve announced action to stimulate the economy with an additional dose of Quantitative Easing, better known as QE2, the sequel to QE1 that debuted in 2008.  QE-1 led to a significant decrease in mortgage interest rates.  QE2 led to the exact opposite.  As yields on US treasuries and mortgage-backed securities continued to rise, Ben Bernanke of the Federal Reserve made a rare prime time TV appearance on “60 Minutes” to reiterate the commitment to QE2.  45 days later, and about a 1% increase in mortgage rates later, I can’t wrap my head around how this helps an ailing economy.  I majored in Economics in college, but rather than dust off some old text books, I turned to a cartoon on youtube:    

QE2 youtube cartoon

This video actually provides clarity for the animosity that other country’s finance ministers have taken towards the US’ Federal Reserve and its decision to instill QE2.  As a mortgage loan officer, I have to say that the sequel sucks!  But, if a weak dollar leads to a healthy increase in exports, which leads to an increase in manufacturing, which leads to an increase in jobs, which leads to economic growth, then I guess I can live with that.