Karl's Blog

Wednesday, May 14, 2008

 After yesterday's dismal drop, today's market works just fine for me. We are still in a lock mode, meaning that if a client signs that purchase contract, it's best to have them take the rate out there and not bet on better rates tomorrow.  Making the market move today is the CPI (consumer price index), a gauge of inflation came in a bit lower than expected even with a .9% jump in food prices. This helped open the flood gates on the DOW, which started the day up 100 points and has yet to drop. Foreclosures are still making big news. RealtyTrac Inc. came out today stating that foreclosures are up 65% from the same month a year ago. What this translates into in terms that make sense is that about 1 in every 519 homes in america received a forclosure notice last month. It's not pretty, but definatly gives banks inscentive to work things out. The bond is up 15 Bp for they day but lost most of it's early morning gains when the stock market opened.  Althoug we are not in a position to get re-priced for the worse, it may still happen today.

Karl Menzer

435-849-0212

http://www.karlmenzer.com

Tuesday, May 13, 2008

 Citing better customer service and internal cost savings, Wal-Mart reported that their profits rose 6.9% in the first quarter of 2008... better customer service??? Riiight.... More likely that many Americans hit by the latest squeeze have become box shoppers to stretch their dollar more. On a positive note (see Steve it can happen), although many of the mortgage based companies reported major losses yesterday, investors bought stock as a sign that the worst has passed for them and they have turned the corner. Retail sales have posted  a loss today and with investors still worried about a possible recession,  stocks and bonds are both down for the day as oil once again teeters with the $126 price.  Bonds (5.5% FNMA 30 yr) are down 34 Bp for the day, but flat from when pricing came out this morning. The potential for pricing to get worse for today exists so keep a keen eye on the market.  We are still loking at a 6% rate on a 30 year FHA, but one more nudge will put us in the 6.125% range. As always, if anything changes I will let you know.

Karl Menzer

435-849-0212

Http://www.karlmenzer.com

THE JOB MARKET

  Weekly Jobless claims dropped dramatically last week. Initial jobless claims came in at 365,000 down 15,000 from the prior week, and 5,000 less than expected. In Utah, labeled as one of the most recession proof cities in America, unemployment edged down to 3.1% in April. Approximately 24,000 new jobs have been created in Utah over the past year, proof that although we are slowing in our growth, our economy is still much stronger than most of the nation.

BOND MARKET

Remember when bonds go down rates go up

For the most part, the market has taken a neutral stance on the bond. While we have seen large losses in the morning (sometimes more than 100Bp), investors continue to buy back into the market later in the afternoon, wiping most if not all of the early losses. The same applies to early gains. A number of mortgage based companies cane out Monday with larger than expected losses, but as investors tend to buy more on the future than the present, stocks of the companies actually rose on the news. I don't know if the worst is over, but with new guidelines in place, future losses do seem to be limited.       

HOUSING MARKET

  Freddie Mac released the results of the Primary Mortgage Survey showing little movement in rates overall last week. Even with the market as volatile as it has been rates on average only dropped .3%. FHA is looking to implement a new up front premium scale to replace the flat up front 1.5%. Slated to Begin July 14^th, the new program will base the up-front MIP on Credit risk.

Karl Menzer

435-849-0212

http://www.karlmenzer.com

Retail sales came lower than expected but with most of that due a drop in auto sales and the dow futures pointing up, if someone signed a REPCE yesterday and there is still overnight price protection, they should lock. The bond is down over 32 Bp for the morning and has fallen below most levels of support. I will have more in this afternoons bond report.

Karl Menzer

http://www.karlmenzer.com

ZERO MONEY DOWN!!!! NO MONEY DOWN!!!! 100% FINANCING!!! Things of the past right? Wrong.... An article caught my eye today that for lack of a better word dogged the gift program process. Although there may be some less than honest lenders who will push an appraiser to boost numbers, many more are doing the due diligence and providing well valued loans to well valued clients. Down Payment assistance programs have had the heat turned on to them recently and have almost lost their ability to do business altogether. Most may be familiar with them as Nehemiah, but there are many others out there that have the same function. What they do is allow the seller to contribute the down payment to a non-profit program that in turn, for a small fee, gifts the money to the borrower. Currently around 36% of all FHA purchases are closed with this type of program. There are a number of different options for those who want to try different routes. In Utah for example, we do have the Utah housing program which is essentially an FHA loan with a state sponsored 2^nd to pay for the remaining balance and even closing costs, USDA has many areas which their rural housing program can be used, relatives can gift money to family members as well as gift equity (if selling a relative a home), or the ever famous sweat equity where the buyer agrees to finish off part of the home in exchange for a down payment. These are tough times, and guidelines change faster than my 4 year old changes clothes (about 4 times a day last time I counted), but there are really still programs that will allow a qualified borrower to get into a home with little more than the earnest money deposit.

Karl Menzer

435-849-0212

Http://www.karlmenzer.com

Bonds have fallen under the stress of the Stock Market Rally. Currently the stock Market is up over 120. This is forcing the Bond down 25 for the day, but 34 Baisi points since pricing came out this morning. If you know of someone who is still floating, it would be best to have them lock, for the short term, before pricing deterioriates. If they missed the re-rice already, tomorrow is another day.

Karl Menzer

435-849-0212

Http://www.karlmenzer.com

Monday, May 12, 2008

Bond Insurer MBIA posted a $2.41 Billion loss in the first quarter. Indymac also came out posting a loss this quarter, then going further by stating that it more than likely show a profit this year.  There isn't much economic news out today, but he week is packed full of earning reports and jobless claims. The bond is sitting on the fence today with Oil, which topped $126 today before retreating back to the $124 range, and stocks, which are up 90 today. Tomorrow is already expected to be worse than expected news on the retail side. Until then I expect the bond to just lie down and take a nap. As always, if anything changes, I will make sure to let you know.

Karl Menzer

435-849-0212

http://www.karlmenzer.com

Bonds have headed down sharply within the last 30 minutes and the FNMA 5.5% is now down 50 Bp for the day.

Friday May 9th, 2008

If speed racer were real I think he may have to start looking at alternative fuel for the Mach 5. Oil topped $ 126 a Bbl today, once again reaching an all time high. Don't even get me started on the price of Platinum. Mix into this volatile market a much sharper than expected decline in our trade gap, a sure sign that consumer spending weak, and you have the makings of a very bad day for stocks and bonds. In mortgage news, the house passed the bill that is already guaranteed a veto by the president. This bill could potentially help over half a million mortgage holders who have fallen on hard times and risk foreclosure by allowing the FHA to take on as much as $ 300 billion in new mortgages. If this passes the veto stamp, it would do much to help the market and add some security to the bond.  The Bond is down 28 Bp for the day, which is actually an improvement from this morning. With the weekend here in most traders' minds, I don't expect anything more than small oil sell off for weekend profit.  As always, if anything changes, I will let you know.

Karl Menzer

435-849-0212

http://www.tooelehomeloans.com

Thursday, May 08, 2008

Initial jobless claims fell more than expected last week, beating analysts' estimates by 5,000. This was also a drop of 15,000 from the previous week. Although this is better than expected, the 380,000, any number above 300,000 is still pretty weak in the markets eyes. After topping $124 yesterday, oil has retreated to the $123 range and seems comfortable staying there. In retail reported mixed results today with the bib box stores showing improvement while more niche stores (ones in malls) reporting losses. This points to a weaker economy as consumers are looking at the latest Olsen twin clothes on sale at the Wal-Marts as opposed to the latest Gap fashion.  We have had a re-price for the better as we saw a late day rally in the bond market. The bond is up 25 for the day and looks like it will settle there. As always, if you have any questions, please don't hesitate to call.

Karl Menzer

435-849-0212

Http://www.karlmenzer.com