Karl's Blog

Friday, April 18, 2008

This has truly been a freaky Friday. With Citigroup posting a whopping $5.1 Billion First quarter loss, the DOW shot up 243 and took the bond down with it. What triggered this earnings loss to be good? Well most investors had already figured that they were going to tank, so since they were in line with expectations, the market felt it was good news. On the up and up, to bolster the DOW and further hurt the bond, Google posted a larger than expected increase in first quarter earnings. So it should be a down day for the bond.... And we were down more than 48 Bp up until about 12:15 mountain time when the bond erased all of the day's losses and actually turned positive. Who sneezed here? From what I can see, 3 Fannie Mae executives agreed to pay nearly $31.4 million in a settlement with the government over their roles in a 2004 accounting scandal.  It's much less than the government wanted, but shows that there is some accountability at the top. Although the bond is up a mere 4Bp form the opening bell, it is up 53 Bp from when pricing went out, allowing for 2 re-prices for the better today.  Keep em' crossed today as the day isn't over.

As always, if you have any questions, please feel free to call me at 435-849-0212

Karl Menzer

karl@karlmenzer.com

http://www.karlmenzer.com/ 

It's been a fun week for mortgage rates.  Here is the weekly news moving the market. Input is always appreciated. 

THE JOB MARKET

Citigroup announce that it plans to cut 9,000 jobs in light of their recent mortgages losses. This on the heels of 4,200 job cuts in January. To add to what is becoming a common way to cut costs Merril Lynch also handed out 4,000 pink slips this week. The Labor Department said Thursday that applications for unemployment benefits rose to 372,000, an increase of 17,000 from the previous week, bringing the 4 week average to 376,000. This is still the highest (with the exception of after Katrina) that we have seen since 2003. On the local side, we are still a low 2.1% in unemployment with 26,000 new jobs created last month. With 44,252 new bodies in Utah last year and an unemployment rate considered too low by some, it's good to be here.

BOND MARKET

Remember when bonds go down rates go up

This has been a week of where bad news is good news. Although Merril Lynch and Citigroup posted record losses, since they were not as bad as expected, the market rallied and bonds sold off. The big good (really) news this week was Google posting a 30% increase in profit from the last quarter. Investors feel that their profit means more companies are spending on advertising, so they must be doing well also and the economy is in good shape. Bonds in turn have hit a major downturn falling past the level of support and raising rates drastically.

HOUSING MARKET

Home Building slumps to lowest levels in 17 years. Wow what a headline. Home building starts dropped 11.9% in March. In Utah, we are down 72% from the previous year.  With sales in the slump (the last time numbers were this low was in 2003) and the sales amount back to the 2006 levels, it is not so good (but not as bad) for our market. Foreclosures are on the rise too. Although Utah is still faring out much better than the rest of the nation (1 in every 538 households), our numbers are still in need of being watched.  Foreclosure filings jumped 93% from the previous year for Utah, with more to come. Most worrisome is the more than $460 billion ARM's set to adjust this year alone. That's a bunch of Jungle mail heading out to the lenders.

For more information please don't hesitate to call me at 435-849-0212 or e-mail me at karl@karlmenzer.com

Karl Menzer

http://www.karlmenzer.com

When I look all the fun filled news out there it is hard to keep a positive note on the market. Foreclosures are up, mortgage write downs are up, rates are all across the board, and the government bailout isn't really bailing anyone out. Where is the silver lining in the clouds? It's really simple. Like  any commodity, housing needs to have a correction every so often. This one is mild compared to the 80's when rates were in the teens, 10% down was the norm, and unemployment was near 10%. I have seen the word recession a number of times in my life, and have watched society as a whole carry on and get better. This market, like the others before it, will pass and the economy will rebound. People are born at a rate of 8 per minute in North America. To take a positive spin on the news, we are looking at a lot of sold signs in the future and not enough for sale signs. It's a rough time, but when all is said and done what will have happened is the crooks and swindlers will be out of the market and the honest Realtor® and Mortgage lender will be better able to do the work that they enjoy doing. Getting Qualified borrowers into a affordable house.

Number of lender who have shut their doors over this:   251

Saturday, April 26^that the Tooele High School, the Tooele County Board of Realtors® is putting on a concert to benefit our homeless population in Tooele County. Although it may not seem it, we have a growing number of people in our community who have become homeless. The concert will start at 7:00 pm.  Playing will be The KAWZ and Veign.  You can purchase tickets in advance from Robin Stewart (435-224-2122), or at most  Realtor® or mortgage office. Ticket prices are $7.00 in advance and $8.00 at the door. 

You can also call me for more information.

Karl Menzer

435-849-0212

http://www.tooelehomeloans.com

Thursday, April 17, 2008'

It’s another less than stellar day with the bond market. Although first time claims beat expectations today, up 17,000 from last week, most have shrugged off the news and moved on to better things. To add to the dismal numbers, after Merril Lynch posted a new $6.5 Billion loss (up to about $200 billion to date), it also announced that it would lay off another 3,000 employees. What investors are looking to today is that the index of leading U.S. economic indicators rose in March for the first time in six months .1%, this beat the expected -.2% drop. Even thought the Philadelphia fed board came out with bleak numbers, that improvement meant the most to the market. Let’s face it; we are in a time where not so bad news is good news. To further kill the bond today, oil passed $115 a barrel thanks to the ever weakening dollar. Currently the bond is down 40 Bp and I have received my first re-price for the worse. If anyone you know is floating their rate to hope for the better, it may be a long term wait this week. As always, if anything changes, I will let you know.

Karl Menzer

http://www.karlmenzer.com

It's been almost 2 years since the collapse of the first mortgage company listed on the implode-o-meter.  Own it Mortgage (one of the first big boys) failed a little over a year ago, touching off the "official" mortgage crises. With so many out of the picture today (Washington Mutual being the most recent), it is easy to understand the increased documentation requirements, capped loan LTV's, and all but A paper loans becoming the norm. The latest casualty of this mess is now the 100% financing programs. The interesting thing is that the change didn't come from the lenders, but rather the companies that insure them. MyCommunity, HomePossible, and the Flex 100 are the latest programs to be essentially removed from the picture. Loans to 100% are still available to those who know where to look. FHA (although technically a 3% down program), can still, with a proper grant, essentially be closed with little to no money down. USDA is an option for those in a rural area (all of Tooele County), and VA still allows 100%. There is much more on this that I can't cover today, but please feel free to call and I will be more than happy to go over what is still out there and what is now needed to qualify your clients.

Number of lender who have shut their doors over this:   249

as always, if you jabe any questions, please don't hesiatate to call or e-mail me at 435-849-0212 or karl@karlmenzer.com

Karl Menzer

http://www.buyatooelehome.com/

Stocks are on a major rally today over earnings reports. Coca-Cola and Intel both reported better than expected earnings while JP Morgan's earnings declined by 50% (ONLY). With the JP earnings we see once again how the not so bad news can be turned into gold. The CPI (consumer price index) met expectations and housing starts dropped more than expected.  Bonds have dropped below their level of support and have dropped heavily into negative territory in the last 2 hours.  If the really in the DOW continues, we can expect higher rates to come. Most are still looking at rates dropping long term, but for now if you have a client working with a lender, let him know if he hasn't locked, then now is the time to do it.

For any questions, please don't hesitate to call 435-849-0212

Karl Menzer

www.karlmenzer.com