Rate Watch #700 Mortgage Rates Bouncy. Climate Change.
December
12, 2009
by Dick Lepre
[email protected]
www.loanmine.com
| Product | Rate | Points | Est. APR* | |
|---|---|---|---|---|
| CONFORMING LOAN PRODUCTS (Loans less than $417,000) | ||||
| 30 Year Fixed conforming | ||||
| 4.75% | 1.00 | 4.96% | ||
| 5.000% | 0.00 | 5.07% | ||
| 15 Year Fixed Conforming | ||||
| 4.25% | 1.00 | 4.67% | ||
| 4.5% | 0.00 | 4.61% | ||
| JUMBO CONFORMING (Stimulus) LOAN PRODUCTS (Loans greater than $417,000 and less that the new amount for your county) | ||||
| 30 Year Fixed Stimulus | ||||
| 5.5 | 0 | 5.57 | ||
| 5.25% | 1.0 | 5.41% | ||
| 15 Year Fixed Stimulus | 4.75% | 0 |
4.87%
| |
| 4.625% | 1 | 4.90 | ||
* conforming loan limits for 2009 are:
1 unit $417,000
2 units $533,850
3 units
$645,300
4 units $801,950
Note that the above table now means something different than it used to. "Conforming" now mean "traditional conforming" (<$417,000 for SFR is the new jumbo-conforming which depends on county. You can find the new Jumbo-conforming limit for your county here. That page says "FHA" but those amounts also pertain to FNMA & FHLMC.
You must not read these as quotes because the rate and price which you will get depends on your precise situation and is affected by but not limited to the following factors: credit scores, property type, occupancy, income, value of property, length of time of the rate lock, whether of not values in your area are declining.
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II) Fundamentals
University of Michigan consumer sentiment was very strong at 73.4. Retail Sales ex-autos was +1.2%. Import Prices ex-oil were +0.7%. Treasuries are selling as the good news for the economy = bad news for interest rates coincides with a technical bearish cycle.
Initial Jobless Claims were 474,000 which was above consensus and previous. This might be simply one bad week in a time when jobless claims were lessening. Bloomberg has an article noting that the Treasury yield curve is steepening. This, generally, indicates concern about inflation. The Secretary of the Treasury has extended TARP until October 2010. The original bill called for TARP to expire at the end of this year but gave the option to the Secretary of the Treasury to make this extension.
III) The Technicals
The daily downcrossed to bearish and the weekly will probably soon follow. The bullish divergence we had a couple of weeks ago gave us low rates which are likely to rise a bit for several weeks.
For those who are not long time readers the basis for these observations about technicals is the work of Jim Grauer which can be viewed at StoMaster.
IV) Analysis
The fundamentals continue to be mixed showing recovering GDP and lagging job recovery. This is the way recoveries always happen. What is in question is the length of time it will take to recover the lost jobs. Keep in mind that just to keep pace with the regular increase in population we need to add 150,000 jobs a month just to stay even.
The Federal Reserve is going to stop buying FNMA/FHLMC paper at the end of the 1stQ 2010. One change is going into place this weekend which will increase the quality of FNMA paper by making debt ratios more strict. In a month or so we will start to hear the media complain that FNMA is not making marginal loans. It would serve to remember that HUD's insistence that FHLMC & FNMA increase the amount of subprime lending destroyed both entities and was the greatest single factor in setting the mortgage mess into motion.
We will likely get one or two more weekly bull cycles before the end of 1stQ 2010 but don't wait. If you have out off refinancing get started now unless you gave a great fixed rate.
V) Climate Change
I wrote a newsletter four years ago expressing skepticism that the increases we had seen in temperatures (from 1978 until 2005) were largely man-made. What concerns me about the present issue (Climategate) with the tossed out data is that this is the worst possible thing which can happen to science. Climate science is complex. If a party which was the repository for much of the data tossed out the raw data then their conclusions are suspect. My opinions remain largely the same as they were four years ago: 1) human activity certainly creates greenhouse gases 2) the effect of those gases on average temperature may be near zero or may be significant. The science to show the correlation does not exist due to the sheer complexity of calculating the effects of increased anthropogenic CO2. 3) I do not believe that the fact that these folks scammed the data disproves the thesis that anthropogenic CO2 causes some increase in temperature. 4) I believe that we are nowhere toward understanding the issue 5) I believe that if someone wants to make substantial changes in laws and fiscal policy based on the thesis that man made CO2 is responsible for global warming they have the obligation to make a compelling case.
Let me repeat the conclusions I wrote back then: We should spend money on basic research with the purpose of better understanding the interactions between the oceans and the atmosphere, plants (and animals) and the atmosphere, cloud physics, a better Milankovitch model, and the effect of volcanoes before we spend any significant amount of money on the abatement of anthropogenic CO2.
Political correctness must take a back seat to science. Science needs to explain global warming and it needs to do so without predisposition as to the causes. Before science can make any accurate analysis of whether or not anthropogenic CO2 affects the climate in a significant manner those scientists need 4 things 1) accurate long term data 2) a mathematically sophisticated model (this would be a large set of differential equations which would describe the interactions of every significant thing which affects the weather) 3) an enormous amount of computer power which likely exceeds the ability of even the most powerful supercomputers we have today 4) objectively.
What is truly suspect is the notion that the increase in average temperature from 1978 to 2005 was due to anthrpogenic CO2. More likely this is evidence of a typical multidecadenal warming and cooling cycle. These cycles have happened for as long as we know. What is notable about the warming cycle which ended in 2005 was that it was not truly global. If you look at satellite temperatures from 1978-2005 you see that Arctic temperatures increased by 2.1 degree Fahrenheit while the southern 2/3'rds or the earth saw an increase of 0.29 degrees. (See: http://www.uah.edu/news/newsread.php?newsID=291. Greenhouse gases are distributed evenly around the earth but the warming happened to a much larger extent in the Arctic. Computer models which assume that CO2 is significantly contributory to global warming show that there should be significant warming in the tropics and this is not what happened. Since I am being serious here I will not suggest that the real culprit is obviously the Grinch in an effort to destroy Santa's habitat.
No one really understands what is going on but I believe that making CO2 output limits a political, social and economic issue without having a scientific understanding is plain dumb. Just as I don't believe that global warming advocates made the case that CO2 was responsible I do not believe that any of these Climategate messages disprove the thesis.
One more important thing must be understood. The consensus opinions of scientists is not science. The notion that the science of global warming is a done deal is blatantly false. Science is not "American Idol". The winning theory is not chosen by vote but by its ability to explain past data and forecast future data. Even with the best conceivable model and massive supercomputers weather and climate forecasting would likely remain an extremely tenuous thing because this is a complex system where a modest inaccuracy in assumptions about initial conditions or an unpredictable size and timing of an El Nino event can throw everything off.
If you have something to add to this discussion please post a comment on the blog.
Dick Lepre
RPM - SF
435 Pacific Avenue #350
San Francisco,
CA 94133
DRE License # 01143973
[email protected]
Web site: www.loanmine.com
Blog: economy.typepad.com
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dial number)
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California Department of Real Estate - real estate broker license #01201643
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