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Mortgage Market Weekly

By Judi Desiderio, Saturday, May 01, 2010
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Eve Robin Jarrett
Senior Mortgage Consultant
Manhattan Mortgage
Office: 631-324-1555 x 25
Blackberry: 631-697-3366
e-Fax: 631-514-3654
Email: EJarrett(at)manhattanmortgage(dotted)com

For the week of Mar 01, 2010 // Vol. 8, Issue 9
Last Week in Review

“LIKE SLUGGISH WATERS THROUGH A MARSH…” The poet Sir Walter Scott wasn’t talking about the economic recovery, but his words paint a pretty vivid picture…and after last week’s economic reports, perhaps a pretty accurate one on the state of the recovery.

Last week’s Gross Domestic Product (GDP) report showed that the economy grew 5.9% in the 4th quarter of 2009, which was in line with expectations and the best GDP reading in more than 6 years – which on the surface, sounds like a great number. However, the gains came from rebuilding of inventory and very modest business spending – not from consumer spending. The biggest component of GDP is consumer spending and the revised number on that front came in lower than expected, and far worse than the 3rd Quarter of 2009, when the government’s Cash for Clunkers program temporarily boosted sales.

On the housing front, Existing Home Sales for January were reported at 5.05 Million units, which was less than expectation of 5.44 Million. As you can see from the chart below, Existing Home Sales have now declined for two consecutive months. New Home Sales for January were also reported below expectations last week.

Odds are that inclement weather affected the housing market negatively in January – since people are less likely to go house hunting in the midst of snowstorms and freezing temperatures. But in any case, last week’s data demonstrated that the housing market remains a bit lethargic.

The good news is that today’s affordable home prices and amount of supply on the market – not to mention low rates and the government’s Homebuyers Tax Credit – present tremendous opportunities for homebuyers who are looking for a great deal.

Chart: Existing Home Sales (By Month)

So how do consumers feel about the economy? Last week, we got a look at two different reports…and both indicated that consumers don’t share the rosy outlook of politicians and the media. Consumer Confidence was reported at 46.0, which was much lower than expectations of 55.0. In addition, the University of Michigan reported that Consumer Sentiment also fell in February. Both reports pointed to ongoing concerns over employment as a major reason for the drop in consumer attitudes about the economy.

To help make ends meet during the recession, some consumers have turned to earning cash as a landlord. If you or someone you know is considering doing the same, read the view article below for important advice to help make sure you’re successful!

Forecast for the Week

This will be a big week of news, starting off right away Monday morning with reports on Personal Income and Personal Spending. We’ll also get a look at the Core Personal Consumption Expenditure (PCE), which is the Fed’s favorite gauge of inflation.

As if that weren’t enough news for one day, we’ll also see the Institute for Supply Management Index on Monday. This is the king of all manufacturing indices and is considered the single best snapshot of the factory sector, so the markets will be paying attention to this report.

Toward the end of the week, we’ll get another look at employment and housing with the reports on Initial Jobless Claims and Pending Home Sales on Thursday.

Finally, the week ends with a bang when the official Jobs Report is released. This report includes the latest government data on job losses and the unemployment rate, as well as the average work week and hourly earnings. With the ongoing concerns over the struggling job market, it will be important to get a current read on the situation.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

As you can see in the chart below, Mortgage Bonds were able to rally last week on weak housing numbers and the struggling jobs market, resulting in improved home loan rates. I’ll be watching carefully in the week ahead to see if Bonds and home loan rates can build on their positive momentum.

Chart: Fannie Mae 4.5%% Mortgage Bond (Friday Feb 26, 2010)

The Mortgage Market View…

Being a Successful Landlord

These days, some homeowners are choosing to rent out all or part of their home to help pay for their mortgage costs. But being a successful landlord is more than just sitting back and collecting the rent. Here are some tips to help if you ever choose to become a landlord.

Charge a Fair Price: All real estate is local, and the best and quickest way to success is to know your marketplace and what you can expect to charge for a fair rent in your area. Some things you can do to determine a fair price include studying local classified ads, scouring the Internet, and finding out what neighbors are charging for rent.

Write the Right Ad: Getting the right tenant is even more important than picking the right price to charge. Attract the right tenants with ad phrases such as “good credit and references,” “no pets,” “no smokers,” etc.

Create a Thorough Application Process: Be sure to require proof of identity, past addresses and landlord contact information, employment information, and references. Also, ask questions like how many people will be living with the applicant and how long they plan to rent.

Check References EVERY Time: Call their previous landlords and ask if the rent was paid on time. Find out how the property was left when they vacated. Were the tenants loud and troublesome? Did they complain a lot? Did they report small repairs in a timely manner? It’s easier to avoid a bad tenant now than to try and evict one later.

A Final Creative Idea: Before signing the deal, make an unexpected visit to your prospective tenants’ current apartment or residence. You will get a good look at how they keep their home as it is likely to be the way they keep yours.

And Always Ask the Experts: Be sure to check with your tax professional to make sure you file your taxes correctly and to see if there are any rebates or other benefits you qualify for.

Some people choose to be landlords, while others have it thrust upon them due to market conditions. Either way, taking the steps mentioned here will help make the experience more successful for everyone involved.

The Week’s Economic Indicator Calendar

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of March 01 – March 05
Date ET Economic Report For Estimate Actual Prior Impact
Mon. March 01 01:00 Personal Income Jan 0.4% 0.4% Moderate
Mon. March 01 01:00 Personal Spending Jan 0.4% 0.2% Moderate
Mon. March 01 01:00 Personal Consumption Expenditures and Core PCE Jan 0.1% 0.1% HIGH
Mon. March 01 01:00 Personal Consumption Expenditures and Core PCE YOY NA 1.5% HIGH
Mon. March 01 10:00 ISM Index Feb 58.0 58.4 HIGH
Wed. March 03 08:15 ADP National Employment Report Feb -35K -22k HIGH
Wed. March 03 02:00 Beige Book Moderate
Wed. March 03 10:00 ISM Services Index Feb 51.0 50.5 Moderate
Thu. March 04 08:30 Productivity Q4 6.2% 6.2% Moderate
Thu. March 04 10:00 Pending Home Sales Jan 1.7% 1.0% Moderate
Thu. March 04 08:30 Jobless Claims (Initial) 2/27 NA 496K Moderate
Fri. March 05 08:30 Unemployment Rate Feb 9.8% 9.7% HIGH
Fri. March 05 08:30 Hourly Earnings Feb 0.2% 0.2% HIGH
Fri. March 05 08:30 Non-farm Payrolls Feb -20K -20K HIGH
Fri. March 05 08:30 Average Work Week Feb 33.7 33.9 HIGH

The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is not without errors.

As your trusted advisor, I am sending you the Manhattan Mortgage Company Mortgage Weekly Update because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

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Eve Robin Jarrett
Manhattan Mortgage
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East Hampton, NY 11937

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