What’s Ahead For Colorado Mortgage Rates This Week : February 8, 2010
Colorado Mortgage markets improved last week on domestic jobs data and international banking concerns. The news triggered buying in the bond market and, as a result, conventional, FHA and VA mortgage rates in Colorado improved for the 4th consecutive week.
Mortgage rates are now at a 6-week low but probably shouldn’t be. It underscores just how important global events can be to U.S. mortgage markets.
For example, corporate earnings continue to improve and key elements of the economy are strengthening. Even the Federal Reserve acknowledges this. In most circumstances, that would be a boon for the stock markets and bond markets would suffer, including mortgage bonds.
Last week, that wasn’t the case.
Early in the week, as (1) China tightened its monetary policy, (2) Greece did little to quell lingering default fears, and (3) Spain raised its deficit forecasts, global investors sought to reduce their collective risk exposure. For safety of principal, many sold some of their more aggressive positions and moved the cash proceeds into the U.S. bond market — which includes mortgage bonds.
On Wall Street, this type of trading pattern is called a “flight-to-quality”. Because mortgage bonds are backed by U.S. government entities, the debt is considered to be ultra-safe. Last week’s extra demand for bonds helped to push prices up and mortgage rates down.
And that was before Friday’s weak jobs report. Although the Unemployment Rate fell to 9.7%, the government reported a net loss of 98,000 jobs last month and this, too, helped mortgage rates tick lower.
This week, we’ll hope for momentum to continue.
There’s very little domestic news to move rates this week so keep an eye on the global market for similar stories like what we saw last week. Or, if you’re not sure what to look for, just give me a call or send me an email and I’ll be happy to watch the markets and Colorado mortgage rates for you.
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7 Ways To Protect Your Credit Score For Better Mortgage Rates
As mortgage lenders tighten approval standards in Colorado and nationwide, the importance of a good credit score is rising. Credit scores not only make the difference between a mortgage approval and mortgage turn-down, but they also play a large role in determining your actual mortgage note rate.
In the 3-minute piece, the NBC Today Show talks about 7 ways that homebuyers ruin their credit — often by accident. Some of the highlighted mistakes include:
- Closing open credit cards
- Making appliance buys on credit prior to closing
- Asking creditors to lower credit balances prior to closing
In general, a 740 FICO will insulate a borrower from the higher costs and/or rates associated with low credit scores. Below 740, though, every 20 points adds to the damage. Watch the video and apply what you can to your own situation. The more you know, the more you can save.
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The January 2010 Jobs Report May Lead Colorado Mortgage Rates And Home Prices Higher
On the first Friday of every month, the U.S. government releases its Non-Farm Payrolls data from the month prior. The data is more commonly known as “the jobs report” and it swings a big stick on Wall Street.
Especially now — many analysts believe job growth is tightly linked to the future of the U.S. economy.
Therefore, when January’s jobs report hits the wires at 8:45 AM ET tomorrow, Aurora, Colorado home buyers would do well to pay attention. A net job reading that is much higher (or lower) than Wall Street’s expectations can make a serious change in home affordability.
Wall Street expects that the economy added 13,000 jobs last month. It would mark the second time in 3 months that the jobs report showed a net monthly gain.
In November 2008, the economy added 4,000.
Jobs matter to the economy for a lot of reasons, but one of the biggest is that when Americans are working, Americans are buying and consumer spending accounts for 70 percent of the economy.
Job growth spurs the economy and draws money to the stock market. Unfortunately for rate shoppers, that kind of stock market growth happens at the expense of the bond market which is where Colorado mortgage rates are made.
Good jobs data usually means higher mortgage rates.
Also, job growth can lead to higher home prices. This is because working homeowners are less likely to default on a mortgage versus non-working homeowners. In this way, job growth helps hold foreclosures to a minimum which, in turn, suppresses the housing supply.
Less supply means higher prices for home buyers.
Mortgage rates are idling this morning in advance of tomorrow’s data. If you’re shopping for a mortgage rate, the prudent play may be to lock your rate before the jobs data is released. A jobs figure that’s higher than the 13,000 expected could cause rate to rise sharply.
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Simple Colorado Real Estate Definitions : Short Sale
A “Short Sale” is when a Colorado home seller sells his home for a lesser amount than what is owed on his mortgage, and the mortgage lender agrees to accept the lesser amount in lieu of a full payoff.
By way of example, a Short Sale may be appropriate for a Denver, Colorado home seller whose mortgage balance is $250,000 but whose home wouldn’t sell for more than $220,000. Rather than pay the $30,000 difference to the lender at the time of sale, the seller enters into an agreement with the lender by which all sale proceeds are paid to the bank and the deficient balance is forgiven.
Short Sales are a preferable alternative to foreclosure but the process still harms both parties. For one, the seller is penalized with a derogatory tradeline on credit for not fulfilling a mortgage obligation. And, two, the lender is forced to take a loss on a Colorado mortgage loan. Versus an executed foreclosure, however, Short Sale damages are relatively limited on both sides.
For this reason, Short Sales are sometimes considered “the economical alternative” to default.
The process of getting a Short Sale approved varies from lender-to-lender and can be time-intensive. Home sellers should not go at it alone — speaking with a real estate agent about the proper protocol is usually the best place to start. And sellers should be aware of how a Short Sale on their credit can impact future borrowing.
Current Fannie Mae guidelines prevent short-selling homeowners from obtaining new mortgage financing for a period of 2 years.
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What’s Ahead For Colorado Mortgage Rates This Week : February 1, 2010
In a news-heavy week, Colorado mortgage markets improved last week, adding to a 3-week rally.
But, given last week’s data and domestic story lines, it’s surprising that rates actually fell.
- The Federal Reserve said the economy continues to strengthen
- Consumer Confidence pushed to a 2-year high
- 4th Quarter domestic output exceeded Wall Street’s expectations
Usually, events like these draw money away from the bond markets and into the stock markets and Wall Street preps for better corporate earnings. The movement pressures mortgage rates to rise.
Last week, however, different stories trumped the headlines including a report from Standard & Poor’s that said U.K. banks are no longer counted among the world’s most stable. This research, in particular, triggered a flight-to-quality among investors that pumped the U.S. dollar and sparked new demand for mortgage bonds.
It’s one reason why we ended the week on a rally and it just goes to show how unpredictable mortgage rates can be.
This week figures to be a challenge, too.
First, we start the week with key inflation data. When inflation runs hot, it’s usually bad for mortgage rates. Inflation is expected to be tame, however — a point the Fed made several times in its press release last week. That said, inflation data is closely watched by markets and can make a big impact on rates.
Then, on Wednesday, ADP releases its private sector job report. The ADP data is a precursor to the government’s own Non-Farm Payrolls report which is due to hit Friday. ADP is expected to show a net loss of roughly 85,000 jobs. Depending on where the actual numbers comes in, mortgage rates could wiggle a bit.
If the ADP report shows much fewer than 85,000 jobs lost, expect mortgage rates to rise. The same is true for Friday’s job report. A miss on expectations will cause Denver mortgage rates to ratchet higher.
Since peaking on the last day of December, Colorado mortgage rates took a slow, steady descent through January. They’ve have taken back close to two-thirds of December’s overall losses. This week, rates could fall some more, or they could bounce back up. The most prudent time to lock would be prior to Tuesday’s closing.
After that, the respective jobs reports will take over and rates could go either way with force.
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Colorado Home Values Rose In November 2009 By Another 0.7%
Reporting on a two-month lag, the government said home values rose 0.7 percent in November.
National home prices are at their highest point since February 2009.
But before we look too much into the FHFA’s Home Price Index, it’s important that we’re cognizant of its shortcomings; the most important of which is its lack of real-time reporting.
According to the National Association of Realtors™, 80% of purchases close within 60 days. As a result, because of its two-month delay, the Home Price Index report actually trails today’s market data by an entire sales cycle.
This is one reason why home values appear to be rising even while new data shows that both Existing Colorado Home Sales and Colorado New Home Sales fell flat last month. The home valuation report is using data from November; the sales reports are using data from December.
The Home Price Index is a trailing indicator and next month, as the Spring Market gets underway, the government will be reporting data from the holidays.
The same is true for the Case-Shiller Index. It, too, operates on a 2-month lag.
All of that said, however, long-term trends do matter in housing and the Home Price Index has shown consistent improvement over the last 10 months. In many markets, home sales are up, home supplies are down, and values have increased. This trend should continue into the early part of 2010, at least.
If you’re wondering whether now is a good time to buy a home in Aurora, Colorado , consider low prices, cheap mortgages and an available tax credit as three good incentives. By May, none of them will likely be available.
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A Simple Explanation Of The Federal Reserve Statement (January 27, 2010 Edition)
The Federal Open Market Committee voted to leave the Fed Funds Rate within its target range of 0.000-0.250 percent.
In its press release, the FOMC noted that the U.S. economy “has continued to strengthen”, that the jobs markets is getting better, and that financial markets are supportive of growth.
There was no mention of the housing market’s strength. The last 3 statements from the Fed included that specific verbiage.
It’s the fifth straight statement in which the Fed spoke about the economy with optimism. This should signal to markets that 2008-2009 recession is over and that economic growth is returning to U.S. economy.
The economy isn’t without threats, however, and the Fed identified several in its press release, including:
- Credit remains tight for consumers
- Businesses are reluctant to hire new workers
- Housing wealth is down
The message’s overall tone, however, remained positive and inflation appears is still within tolerance.
Also in its statement, the Fed confirmed its plan to hold the Fed Funds Rate near zero percent “for an extended period” and to wind down its $1.25 trillion commitment to the mortgage market by March 31, 2010. This is noteworthy because Fed insiders estimate that the bond-buying program suppressed mortgage rates by 1 percent through 2009.
Mortgage market reaction to the Fed press release is, in general, negative. Mortgage rates in Denver are rising this afternoon.
The FOMC’s next scheduled meeting is March 16, 2010.
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Coloraodo Mortgage Rate-Locking Strategy Ahead Of The Fed’s Meeting Today
The Federal Open Market Committee ends a scheduled, 2-day meeting today in Washington. It’s the first of 8 scheduled meetings for the policy-setting group in 2010.
The group adjourns at 2:15 PM ET.
As is customary, upon adjournment, the Fed will issue a press release to the markets recapping its views of the country’s current economic condition, and the outlook for the near-term future.
The post-meeting statements from the Fed are brief but comprehensive. And Wall Street eats them up. Every word, sentence and phrase is carefully disected in the hope of gaining an investment edge over other active traders.
It’s for this reason that Colorado mortgage rates tend to be jittery on days the FOMC adjourns. Wall Street is frantically rebalancing its bets.
Today should be no different.
The FOMC is expected to leave the Fed Funds Rate within its target range of 0.000-0.250 percent — the lowest it’s been in history. However, it’s what the Fed says Wednesday that will matter more than what it does.
After the Fed’s last meeting in December, it made several observations:
- The jobs market is getting “less worse”
- The housing sector is making improvements
- Financial markets are stabilizing further
The economy is gradually improving, the Fed told us, but there are still risks to the economy ahead. Furthermore, inflation remains in check.
As compared to December’s press release, today’s FOMC statement will be closely watched. If the Fed changes its verbiage in any way that alludes to strong growth and/or inflation in 2010, expect Colorado mortgage rates in Aurora to rise as Wall Street moves its money from bonds to stocks.
Conversely, reference to slower growth in 2010 should lead rates lower.
We can’t know what the Fed will say so if you’re floating a mortgage rate right now or wondering whether the time is right to lock, the safe approach would be to lock prior to 2:15 PM ET Wednesday. After that, what happens to rates is anyone’s guess.
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Colorado Existing Home Sales Plummet In December, But It Was Expected
Just one month after from blowing away Wall Street, December’s Colorado’s Existing Home Sales hit the skids, shedding nearly 17 percent and falling to a 4-month low.
Don’t be alarmed, though. The plunge was expected. And not just because Pending Home Sales cratered last month.
When November’s Existing Home Sales surged, it was clear to observers that an expiring $8,000 federal tax credit was the catalyst. At the time, the tax program was slated to expire November 30 and the looming deadline pushed a lot of would-be buyers in Aurora from a December time frame into November.
The expiration date has a cannibalizing effect on December’s sales figures. It was only later that Congress extended the tax credit to June 30, 2010.
So, with Colorado home sales plunging in December, it’s no surprise that home supplies rose for the first time in 9 months. Home Supply is calculating by dividing the number of homes for sale by the current sales pace.
The national housing supply now rests at 7.2 months.
Despite December’s Existing Home Sales report appearing shaky, it’s actually terrific new for home buyers in neighborhoods like Piney Creek, Colorado.
See, for the past few months, as housing has been improving, sellers nationwide have been bombarded by messages of “hot markets” and rising home prices by the media. Psychologically, a seller is more likely to hold firm on price if he believes the housing market is improving and now December’s data is deflating that argument.
This is why we say there’s always two sides to a housing story — the buyers’ side and the sellers’ side. And, usually, what’s good for one party is bad for the other. It’s what we’re seeing now.
Because of soft data like December’s Existing Home Sales, buyers may retake some negotiation leverage that’s been lost since Spring 2009, helping to improve home affordability and, perhaps, spur more sales.
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What’s Ahead For Colorado Mortgage Rates This Week : January 25, 2010
Conforming and Colorado FHA mortgage rates improved last week on the combination of weaker-than-expected economic data and new anti-banking rhetoric from the White House.
The S&P 500 shed nearly 4 percent in its worst weekly showing since October 2009 as all 10 sectors fell. As the money left stock markets, it made its way to bonds — including the mortgage-backed variety.
As a result, Colorado mortgage rates fell for the third straight week.
Since shedding 300 basis points in December, mortgage bond pricing has recovered a bit more than half of those losses. It’s helping with home affordability and opening new refinance opportunities in Denver and around the country.
This week, though, mortgage rates could rise back up. There’s a lot going on.
First, on Monday, the December Existing Homes Sales report will be released. The report is expected to be extremely weak as compared to November. This is because of a combination of factors including:
- The initial tax credit expiration date of November 30, 2009
- Sharply rising mortgage rates throughout the month of December
- A general slowdown from the holidays and from the weather
Therefore, don’t be surprised by the newspaper headlines you see Tuesday morning.
Other data this week includes the Case-Shiller Index – a measure of home prices nationwide — and the New Home Sales report. The Case-Shiller Index has registered mild home price improvement over the past 8 months and its latest report is expected to show the same. New Home Sales should be similarly strong.
But, the biggest news of the week is the first Federal Open Market Committee meeting of 2010.
The Fed meets Tuesday and Wednesday this week and Wall Street will be watching closely. The Fed is not expected to change the Fed Funds Rate from its current target range of 0.000-0.250 percent, so, instead, markets will watching for the Fed’s post-meeting press release.
What the Fed says about the economy will be much more important that what it specifically does about the economy for now. If the Fed says the economy is growing as expected, look for mortgage rates to rise. Conversely, if the Fed says the economy is at risk, expect mortgage rates to fall.
The safest rate lock strategy this week is to lock your Colorado mortgage rate before the Fed’s 2:15 PM ET adjournment Wednesday. Rates will be bouncy all week, but once the Fed’s press release hits the wires, it’s anyone’s guess what will happen.
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