Karl's Blog

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

Stocks have tumbled as oil passed the 124 mark. The bond  has rallied and is now up over 39 Bp for the day and rates have improved and we are looking at 5.875% on a 30 yr FHA and 5.75% on the 15 yr.

Wednesday, May 07, 2008

A bi-partisan plan to relax the standards for FHA is meeting resistance from the top if the food chain, with Bush threatening to Veto the action saying it won't help.  Neither did the FHA secure plan, but that didn't stop anyone from signing off on it.  Let's face it; the most unfortunate side effect of the sub-prime fall-out is there isn't sub-prime anymore. Although it was abused, there were countless homeowners who needed it to live the American dream. People who can (and are still) afford the home they wanted but didn't have the most perfect track record. At some point that part of the market will need to be addresses, and I personally would prefer to see a client in a 30 yr fixed with MI for 5 years than a 2/1 arm that jumps from 7% to 9% or higher. Market news came mixed today. Oil is above $123 a Bbl, but it looks like most investors have had enough (for now), and are turning back to the safety of the bond. Pending home sales dropped to a new low last month to 83.8 according to the NAR. A number of 100 is where it was when the report started in 2001. Februarys numbers came in revised lower by well over 3%, putting most in the mindset that the bottom they had thought we reached is still a bit lower. The shiny coin in today's news is that worker productivity rose much higher than expected. While this is good for keeping inflation in check, it also shows that employers are now squeezing more from the workers that have not been laid-off.  The bond is up 29 Bp for the day and teetering towards a price change for the better. As always, if you have any questions or have a scenario to run, please don't hesitate to call or e-mail.

Karl Menzer

Tuesday, May 06, 2008

Without much economic news out, investors will be looking to earnings and oil to setting the tone for the week. And what a tone set today. Fannie Mae posted a mild $2.3 BILLON loss for the first quarter.... Not the year, just the first quarter. Sighting the weak mortgage market and rising foreclosures as the reason, they are in the process of offering $6 billion in new stock in order to help the hemorrhaging.  The government has also stepped up and will lower their reserve requirement from 20% to 15%, and then again to 10% later this year. UBS (Swiss bank) also reporting a loss to the tune of $10.97 billion this quarter. In response to the loss they plan on immediately handing out pink slips to approximately 7% of their workforce. If anyone needs a job, oil be the way of getting gold, with it once again breaking record territory today. Adding to the splendor, most analysts are starting to predict a price of $200 a barrel this year. Time to break out the bicycles. The bond is at a flat zero for the time being and rates flat from yesterday.  As always, if there are any questions, don't hesitate to call.

Karl Menzer

435-849-0212

http://www.menzerteam.com

I get a number of calls from investors lately asking to re-finance their construction loan into a permanent loan. They have the home on the MLS, and got the construction with whatever loan was out there at the time, what to do now. If we can take them through a loan (good scores and full documentation), most lenders are looking at an 80-90% max LTV on the re-finance loan. Then you have the ever looming declining market condition. Also, it will need to come off of the MLS before any lender I know of will even take a look at it. It can be done, and I don't mind the commission... However (here is where I may digress from the traditional thought of what a lender does). What is the best option for them? Most times it's not going to be to cram a new loan on a house they are trying to sell. If they can get an extension on the construction loan, I strongly suggest it. They are trying to sell a home and hopefully make some sort of profit from it. The last thing they need is to add additional costs to the project by refinancing. Typically you can expect 3% in closing costs. What I have been discussing with investors is to take that cost and reduce the price, offer incentives (seller paid closing costs, seller willing to contribute to a down payment assistance program, etc.), add landscaping, or see what it can be dropped to save their credit for future investments. It's good for them, good for the market, and good for the realtor. I may not make a commission, but it's better than your client losing a home.

Number of lender who have shut their doors over this:   255

THE JOB MARKET

With all the recent layoffs announced and jobless claims coming in either at or above what was expected, unemployment actually dropped last month. It wasn't big, only a .2% drop, but we are in the market where not so bad news is good news. The biggest hit to the market is still coming from housing and construction, with builder related industries handing out 61,000 pink slips in April. In Utah, non-farm Growth is still at 2.1% (job creation), and unemployment waaay below the national average at 3.3%. According to the Department of Workforce Services, there are still "Tens of thousands of job openings in Utah". It may not be a Brazillion, but it is a real number.

BOND MARKET

Remember when bonds go down rates go up

If bonds were a comic book, their character would be bizarro Superman. With all the strength of the real thing but the exact opposite, bonds went against what was expected last week. I personally am thankful of that. On Friday, the bond tanked well over 100Bp in early trading, but then recovered with the same good news on the wire. On Monday, with more good news from the service economy, bonds once again headed down, only to recover later on in the day. It is becoming a trend for the bond to make up most of what is looses in the day. One major factor is strength in the dollar. Besides that, go fish.  

HOUSING MARKET

 New home process dropped 1.2% in Utah for the first quarter. Tooele fared out a little less than stellar with a 4.7% decrease in home prices (19.3% in Grantsville). These are still good numbers when compared to the 12.7% national average, with the exception of Grantsville. Foreclosures across the nation increased 23% from the previous quarter, this with the hope now program on the books. Most lenders have been slow if not at all adopting the program. The biggest issue we have on the books is a declining market LTV hit looming over the harder hit areas.

CURRENT RATES

As of May 5^th      

30yr Fixed Average    15d                  6.00%

15yr Fixed Average    15d                  5.75%  

Karl Menzer

435-849-0212

https://www.karlmenzer.com

Monday, May 05, 2008

Oil futures passed $120 a barrel today.  This will put a damper on both the bond and Dow. In other news, the service sector (ISM) beat analysts' expectations and for the first time in months made it above the 50 mark to 52. Remember, anything below 50 shows that the market is contracting.  With Countrywide shares dropping after Friedman, Billings, Ramsey & Co, came out today valuing them at $2 per share. Countrywide's rating was reduced to junk may 2^nd on worries that Bank of America may not back their debt pending the takeover.  Bonds were down over 23 Bp this morning, but have once again recovered and are currently up 1Bp. Most pricing came out while it was still down, and if we see more improvement, we may also see a re-price for the better today.  As Always, please don't hesitate to call if you have any questions.

Karl Menzer

435-849-0212

http://www.karlmenzer.com