Rate Watch #747 QE2, the White Queen, the Tea Party.
November 5, 2010
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 | ||||
4.000% | 1.00 | 4.14% | ||
4.25% | 0.00 | 4.21% | ||
15 Year Fixed Conforming | ||||
3.625% | 1.00 | 3.88% | ||
3.875% | 0.00 | 3.94% | ||
High-balance CONFORMING LOAN PRODUCTS (Loans greater than $417,000 and less than Hi-Balance amount for your county) | ||||
30 Yr Fixed Hi-Balance | ||||
4.75% | 0 | 4.81% | ||
4.5% | 1.0 | 4.66% | ||
15 Yr Fixed Hi-Balance | 4.125% | 0 |
4.25%
| |
3.75% | 1 | 4.02% | ||
* conforming loan limits for 2010 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 means "traditional conforming" (<$417,000 for SFR is the new jumbo-conforming which depends on county.) You can find the new High-Balance 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, and cash out (if refinancing).
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II) Fundamentals
Nonfarm Jobs was +151,000 for October. This was well above consensus and previous.
Service producing added 154,000. Goods producing lost 3,000. Government lost
8,000. While the headline data is the best in a long time, this level (+150,000)
is approximately what we need to add each month to keep the same employment
rate as a consequence of increasing population. The other annoying datum is
the increase in the number of people who are marginally attached to the labor
force. In the past 11 months we have added 874,000 jobs and the number of people
marginally attached has gone from 2.4 million to 2.6 million. "Marginally
attached" means that you are unemployed, have looked for work in the past
12 months but not looked for work in the past 4 weeks. The other encouraging
thing is the decrease by 318,000 in "involuntary part time" employees.
These are folks who wanted full-time jobs, were previously only offered part-time
but now have full time employment.
All-in-all I rate this as a rather positive report for the current time. We
are not out of the woods but have taken a step in the right direction.
ISM Services was 54.3 - up and signaling mild growth. Factory Orders were +2.1% - previous was -0.5%. The Consumer Metrics Daily Growth Index shows a nice move upward. I theorized previously base on a similar spike starting the day after the 2008 elections that it appears that consumers really do start spending more as they are voting out of office those whom they blame for economic woes. Even if the underlying idea that replacing those in office will benefit the economy is false, the fact that people think it is true and start spending make make those beliefs self-fulfilling.
Personal Income: Actual -0.1%, consensus 0.2%, prior 0.5% (revised 0.4%)Personal Spending: Actual 0.2%, consensus 0.4%, prior 0.4% (revised 0.5%)
PCE Prices - Core: Actual 0.0%, consensus 0.0%, prior 0.0%
ISM Index: Actual 56.9, consensus 54.0, prior 54.4
Construction Spending: Actual 0.5%, consensus -0.7%, prior 0.4% (revised -0.2%)
III) The Technicals
The daily is bullish. The weekly is bearish. The monthly is bullish. The net at present is bullish which, combined with Fed buying, should send yields down.
For those who are not longtime readers, the basis for these observations about technicals is the work of Jim Grauer which can be viewed at StoMaster.
IV) Analysis
The Fed announced another round of quantitative easing which could drive mortgage rates back down again and provide another refi wave.
The Fed's QE2 has me thinking about Lewis Carol's "Through the Looking Glass." The White Queen is having a discussion with Alice and says: "It's a poor sort of memory that only works backwards." This line was often quoted by Swiss psychologist Carl Jung to explain what he called synchronicity.
Bernanke, cursed with his knowledge of the Great Depression, is using the past to guide the future. That is not really strange. This is what almost all of us do all the time. But is the problem with the economy our inability be be as imaginative as the white queen and be able to see a future and be as confident that is as good a guide as the past. The economy is extremely complex and is ultimately based on the choices of a few hundred million people. It does nor readily lend itself to the kinds of lab experiments that the physical sciences thrive on. Someone such as myself with a degree in physics and many years of creating computer software systems still attempts to comprehend the economy with the naive belief that it can be understood and properly forecast.
What is missing at present is the confidence of the American consumer. If the consumer starts to genuinely feel that we are on the road to recovery then we will recover. If the consumer does not feel that we are on the road to recovery then it matters little what the Fed, the President and Congress do. If consumers can see the future the way the White Queen was able to and act on the belief that perception of that future is as sure as our memory of the past then the economy will improve. What would help is that if all of these folks in D.C really got behind the populace and helped. The economic growth that started when Reagan was President may have had as much to do with his infectiously positive attitude about this country as it had to do with his fiscal policies.
GDP and job growth will happen if consumers and businesses want it to happen. Believing that the government can make this happen is a flawed concept. Which is a nice segue to...
V) Tea Party
The biggest political story of the past year was the Tea Party. The media with its simple-minded "red state/blue state" way of looking at politics was simply not prepared. The Tea Party movement consists of two sets of people with one common and one differing point of view. The common thing to all Tea Party members is that they want less government. There are two approximately equal sized groups of Tea Partiers. One is classic (at least on paper) Republicans. By this I mean that they preach less government spending but hold the Republican sentiments that politicians should defend what I will simply describe as traditional values. I grant that the expression "traditional values" could be discussed all day so I will not even start to discuss it.
The other set of Tea Party members are libertarians. There are people who believe in less government and less government spending but who believe that the government should simply leave the public alone to set its values. Libertarian thinking is best explained by the Cato Institute.
If you have something to add to this discussion please post a comment on the blog.
Dick Lepre
RPM - SF
1400 Van Ness Avenue
San Francisco, CA 94109
DRE License # 01143973
[email protected]
Web site: www.loanmine.com
Blog: economy.typepad.com
(415) 244-9383
(866) 488-2051 fax
California Department of Real Estate - real estate broker license #01201643
But neither them, nor the Democrats, have the proper priorities. ALL put the market first, and people UNDER the market.
And such prioritization -- which is downright IDIOTIC, when one steps outside the prevailing paradigm that GOT us in this mess -- will inevitably shortchange people, and lead to the dog-eat-dog battle we see here in the US, with its huge percentage of adults who are incarcerated.
Coincidence? I think not. When money is everything, so greed follows.
Posted by: Frank B | November 12, 2010 at 10:22 PM