Keeping You Informed…
The Jobs Report: Good For The Economy, Awful For Mortgage Rates
Before this morning’s jobs report, mortgage rates were up 0.375 percent on the week. Post-release, the figure has doubled. According to the government, the U.S. economy shed just 11,000 jobs in November, a 100,000 job improvement from October and the lowest tally since June 2007. Furthermore, the national Unemployment Rate dropped to 10.0 percent.
The data is building economic optimism on Wall Street, forcing a retracement of the flight-to-quality bets made since October. These safe-haven bond buys dropped rates to their lowest levels of all-time last week. This week, not so much.
There’s a massive MBS sell-off in process. Rates unwound 3 weeks of improvement in the first 3 minutes of trading.
Now, if it seems strange to be talking economic recovery while Americans are still — let’s face it — losing jobs, remember that economic data always needs context and the context here is that Non-Farm Payrolls is a lagging indicator. This means it’s more of a commentary on past economic events than a prediction of future ones.
The jobs report rarely reflects the economy “right now” as illustrated above.
During the Recession of 2001, job loss peaked in October of that year — 1 month before the recession ended. Beginning in February, then, even as the economy expanded, job loss continued. It wasn’t until October 2002 that job gains went net positive.
The same pattern emerged earlier this year.
- Job loss peaked in January 2009
- The recession ended in February 2009
- Job losses are continuing even as the economy is growing
And this is why today’s job report, although negative, is still positive. The numbers were much better-than-expected, further proof that the U.S. economy is in recovery.
Unfortunately for rate shoppers, though, mortgage markets are getting slammed. Already today, rates are up 0.375 percent.
If you’re under contract for a home or otherwise in need of a mortgage, talk to your loan officer about rates as soon as possible. One of the dangerous patterns of which to be concerned is that rates tend to fall slowly and rise quickly.
We had several weeks of rates going lower; it could all unwind in just a day.
“Play like a champion today!”
Joe Bailey - Loan Officer
O. (831) 689-8500
C. (831) 251-5167
Joe.Bailey@bankofamerica.com
Posted in Mortgage Market Updates | No Comments »
I’m sure by now you are familiar with the terms Foreclosure and Short Sale! Our economy hasn’t provided a lot of options for people caught in a home when you consider the dwindling home values. First American CoreLogic reported that the percentage of homes with negative equity jumped to 23% in the third quarter of 2009. That means one out of every four homes in America owe more on their mortgage than the value of the property. There are a lot more interesting facts located in this Wall Street Journal article, http://embracevision.com/1_in_4_Borrowers_Underwater.
What are your options? I really only see three options to this current problem…
Option #1: Attempt to obtain a Loan Modification.
This is not an easy option because a lot of lender’s won’t approve modifications. Also, depending on the amount of negative equity in the property, principal reduction will be required. Ask yourself, should the bank take a discount on the loan so you can remain in the home? Depending on how well you can explain this to the Lender will most likely determine the outcome of their decision!
Option #2: Work with an Investor or Real Estate Agent to pursue a Short Sale
This option also requires the Lender to accept a discount on the property. However, banks are more likely to accept a short sale when a loan modification won’t work. Also, if the homeowner doesn’t need to stay in their property, it might be more beneficial to them to work with a professional on a short sale. Going through a short sale will help to save complete devastation of the borrower’s credit and can get them started on the right path for their next home in the near future.
Option #3: Just walk away…
This is the easiest option a homeowner can look at up front. However, the outcome of walking away and going into foreclosure can hold a heavy burden. The burden for the homeowner is the demise of their credit and their dismal hopes for owning a home anytime in the near future. The burden for the Lender is the high cost of going through the foreclosure process. The home will be vacant much longer, which means more damage. Also, they will need to hire a professional to market and sell the property. All of this extra cost along with the discount on the property value doesn’t look very appealing to the Lending Institutions.
My opinion, for what it’s worth, do something…do anything…just DON’T walk away!
Thanks for taking the time to check out my article and as always, feel free to email me so we can chat!
Aaron Clendenning
aaron@embracevision.com
Posted in Real Estate News | 2 Comments »
