Jobs Fall Short

With the end of the government shutdown, investors turned their attention to the economic data. The September Employment report was weaker than expected, while the rest of the data released this week was mixed. As a result, mortgage rates ended the week a little lower.
Delayed by the shutdown, the September Employment data was released on Tuesday. Against a consensus forecast of 180K, the economy added just 148K jobs. The Unemployment Rate unexpectedly dropped from 7.3% to 7.2%, the lowest level since November 2008. The decline was mixed news, though, since it was due to both job gains and to people who left the labor force, meaning that they stopped trying to find a job. Bottom line, the results were weaker than what Fed officials would like to see. Between the ongoing uncertainty about future fiscal policy and the slow pace of improvement in the labor market, investors now expect that the Fed will not begin to taper until at least the March Fed meeting.
While the labor market data disappointed investors, the housing market continued to perform well. September Existing Home Sales were just slightly down from the four-year high reached in August, and they were 11% higher than one year ago. Total inventory of existing homes available for sale was unchanged at a five-month supply. Since the Existing Home Sales data is produced by the National Association of Realtors, it was unaffected by the government shutdown. The New Home Sales report, which is produced by the government, is delayed.

Congress Reaches Deal

Congress approved a deal on Wednesday to raise the debt ceiling and to fund the government for a few months. The news lifted both stocks and bonds. The S&P 500 index reached an all-time high. Mortgage rates also improved nicely after the deal was reported.

The deal extends the government's borrowing authority until February 7, removing the risk of default. The deal also funds the government until January 15, ending the shutdown. It provides more time for negotiations, but it does not bring the two sides any closer to reaching a long-term agreement on the major fiscal issues. For mortgage markets, even the slight risk of default had been enough to prevent some investors from purchasing government bonds, including mortgage-backed securities (MBS). After the deal, these investors resumed their purchases of MBS, which lifted MBS prices and lowered mortgage rates.

Mortgage rates benefited from the agreement for another reason. Investors now think that the Fed will wait longer to begin to taper its bond purchase program. Fed officials have expressed reluctance to reduce monetary stimulus while future fiscal policy remains uncertain. If history is any indication, the debate in Congress over a longer-term budget and deficit reduction package likely will continue right to the extended dates. In addition, before tapering the Fed will want to see how much the government shutdown slowed the economy. The flow of economic data produced by the government will resume next week, but it will take some time to sort out the impact of the shutdown from the underlying strength of the economy.

Week Ahead

The end of the government shutdown means that the government will produce its economic reports again. The important September Employment report, originally scheduled for October 4, will be released on Tuesday. The other postponed reports, including CPI and Retail Sales, will be released in coming weeks. The rest of the schedule for next week includes Existing Home Sales on Monday, Jobless Claims on Thursday, and Consumer Sentiment on Friday. New Home Sales was originally scheduled for Thursday, but the report may be delayed.

Debt Deal Passed

Last night, Congress passed the debt deal which will fund the government and raise the debt ceiling for a few months. Some investors had been hesitant recently to purchase government bonds due to the risk of default, however slight. When the deal seemed certain to pass, these investors began purchasing Treasuries and MBS in the middle of yesterday's session and have continued this morning. Today's Jobless Claims data caused little reaction. Weekly Jobless Claims dropped to 358K, above the consensus of 330K, as the shutdown had a bigger than expected impact.
The Dow is down 100 points. Philly Fed is scheduled to be released at 10:00am ET.

Debt Deal Update

 The Senate and the House will vote on a debt deal later in the day, and it is expected to pass. The deal would extend the government's borrowing authority until February 7, which would remove the risk of default. The deal also would fund the government until January 15, ending the shutdown. It would provide more time for negotiations, but it does not bring the two sides any closer to reaching a long-term agreement on the major fiscal issues.
Reports of the imminent deal caused the stock market to move sharply higher. For MBS markets, the deal was also positive. Without a longer-term resolution to the fiscal issues, the Fed may be hesitant to begin to taper its bond purchases well into 2014. Today's other economic news had little impact.
The October NAHB Home Builders confidence index dropped from September to the lowest level since June. The Fed's Beige Book report  ed "modest to moderate" economic growth in all regions, despite the government shutdown. The Dow is up 200 points.
Tomorrow, Jobless Claims, Housing Starts, Industrial Production, and Philly Fed are scheduled.

TOP TEN THINGS A REAL ESTATE AGENT SHOULD REMEMBER

1. True Conforming loan limit is $417,000 Loan amounts and under.

2. Upper conforming before JUMBO loans go from 417 loan amounts to max 546,250 currently in San Diego County. Rates are typically a bit higher on Upper Conforming.

3. Minimum down conventional SFR purchase 417K loan amount and under 3% - Condo 5%

4. There 5 different types of PMI for conventional—not just monthly.

5. FHA is min 3.5% down all can be gift and also NON Occupant co borrower allowed.

6. When taking a listing ask if paying off an FHA loan—if so has to fund at the end of the month to avoid seller paying interest all month.

7. When a buyer goes into escrow please make sure the Loan Officer gets a FULLY executed contract with all counters immediately to help expedite the appraisal process. Appraisers have to have to complete the appraisal. Please remove lock box so the agent will be there to meet and also make sure the CO2 monitors are on all levels of the home.

8. After a short sale the first loan a buyer can get is an FHA loan – 3 years after the final sale of the home.

9. If you have a change in COE or a credit from the seller we need the Addendum fully signed ASAP to update the file and the appraisal.

10. No personal property that is removable to be on the contract. Deal with outside of escrow, please.

Call Michelle Morris 619-850-3600 with any questions!

Progress in Congress

With government produced economic reports postponed by the shutdown, the budget and debt ceiling discussions in Congress dominated the economic news again this week. The gridlock in Washington and the signs of progress have caused large movements in the stock market, but the impact on mortgage rates has been much more limited, and mortgage rates ended the week just a little higher.

Of the two, the debt ceiling has much more serious potential consequences for the economy and financial markets than the government shutdown. With the debt limit rapidly approaching, on Thursday the two parties raised investors' hopes for a deal. It was reported that both sides might agree to a short-term deal which would extend US borrowing authority until November 22. Such a deal would remove the threat of a disruptive default in the short-term, and it would give Congress more time to reach a longer-term compromise. It is not known at this time whether the deal would end the government shutdown. On Thursday, stocks recovered all their losses from earlier in the week and turned positive for the week.

Investors almost universally misread the Fed's signals leading up to the September 18 Fed meeting, when the Fed decided not to taper its bond purchase program. As a result, investors were very eager to see the detailed Minutes from that meeting, which were released on Wednesday. The vote at the meeting was 9 to 1 in favor of maintaining the current level of bond purchases, but the Minutes revealed that Fed officials had very mixed feelings about whether to taper and that it was a "relatively close call". Overall, Fed officials wanted to wait for greater improvement in the labor market before reducing monetary stimulus. In addition, they expressed concern that the rise in interest rates that had been seen and the unresolved questions about fiscal policy could slow economic growth.


The Week Ahead

Investors will continue to follow the budget and debt ceiling discussions next week. If the shutdown is not resolved, most of the economic reports scheduled for next week will be postponed, including the Consumer Price Index, Industrial Production, and Housing Starts. Unaffected by the shutdown, the Fed's Beige Book will be released on Wednesday and the Philly Fed index will come out on Thursday.

Reasons Why You Should Consider Buying in 2013

Are you planning to buy in the next few month? Here are some reasons why you should consider making your new home purchase in 2013.

1.     Rates continue to be low and are still falling and it may be easier to get a mortgage.  Though rates are slightly higher than their all-time low at the end of 2012, they are still an attractive option for many home buyers.  

2.     The cost of renting is higher than the cost of owning a home.  Recent studies have shown and many experts agree that home purchase can be up to 44% cheaper than renting, making home purchase more and more attractive.

3.     Home prices are still relatively low.  Although market trends vary from neighborhood to neighborhood, on a whole, housing prices have increased by only about 1%, making 2013 a great year to purchase a home.

4.     The opportunity to invest your money and build equity is now.  Investing your money into a new home purchase enables you to put your monthly payment towards equity.  With rates as low as they are and home values holding steady, selling in 5 or 10 years at a profit may make sense for you.