The Incline Village Real Estate environment is still prime for some of the best buys in many years.  People that thought that Incline Village real estate was out of reach are now reconsidering.  See all the current financial trends and comments below.    Tim Lampe

The credit markets, after rising solidly for a couple of weeks, are wandering aimlessly again. That means, most likely, that investors all over the world are once again very uncertain about the short- to midterm future. Without a theme (optimism or pessimism), interest rates are likely to dance in place, moving very little.

At the moment, this market is blazing no trails, therefore. What we will need is a degree of certainty that employment is improving, retail sales volume is rising, and homes are selling in gratifying numbers. We have no certainty about any of those subjects. So we watch and wait.

And that, sadly, seems to be what the potential homebuyer is doing as well. The last Pending Home Sales Index showed an 8.2% jump in the number of transactions that would close over the coming months. We have little to no confirmation of that from new applications for purchase money mortgages, though. Most likely, we will see applications for purchase money loans rise very soon. If not, we have a bit of explaining to do.

In any case, even if purchase money mortgage applications rise and existing-home sales (and, hopefully, new home sales) improve, there will be no celebrations of a recovered economy. It will take more than an upward push from a  government subsidy (the tax credits for homebuyers) to convince the world that the American economy is truly on the mend.

And this may be the way we continue to proceed--forward three steps, back two, slowly and uncertainly. And then one day, very likely, someone will wake up and say, "Look! Things have really improved!" And indeed, they will have.

 Interest rates remain low: 

 Conforming 30 year fixed rates are currently 5.125%% with no points (for borrowers with high fico scores, owner occupied, and 25% down for condos or 20% for homes).

 Jumbo rates for primary residences with 25% down (SFD) up to $850,000 are 4% with no points (5/1 ARM).

April 14, 2010

KEY INDICATORS [4/13/10 close]

Gold $1151.20/ounce [up]

Crude Oil(Brent) $84.40/brl [down]

U.S. Dollar to…

    Euro .7361 [down]

    Japanese Yen 93.09 [down]

6-mo Treasury Bill Yield 0.23%

10-yr Treasury Note Yield 3.82%

[6-month down 2 bps, 10-yr down 13 bps]

11th Dist Cost of Funds 1.614%[-]

30-yr Fixed-rate Mortgage 5.43%

15-yr Fixed-rate Mortgage 4.93%

1-yr ARM 4.79%

[HSH averages rates: 30-yr

down 10 bps;15-yr down 14 bps; 1-yr ARM down 11 bps]

Mortgage Bankers Association Mortgage Applications Index

week ending 4/2

  Overall

    536.3 (down 11%; up 1.3%

the week prior)

  Purchase Money Loans

    243.6 (up 0.2%; up 6.8%

            the week prior)

  Refinancing Loans

    2250.6 (down 16.9%; down 1.3%

the week prior)

Jobless Claims 4/3

    460,000 – prior week 439,000 – continuing claims at 4.55 m

Consumer Credit Feb

    Down 5.6% overall – revolving credit down 12.3% - non-revolving down 1.6%

Chain Store Sales Mar

    Up 9%

Weekly Commentary

The good news this past week was that sales in chain stores rose by a strong 9% in March. The bad news was that new claims for unemployment insurance also rose, from the prior week’s 439,000 to last week’s 460,000. A sustained improvement to retail sales is very unlikely unless we can see—and experience—better employment numbers.

 

So where are we? After a significant run-up among most interest rates last week, blunted by the heavy demand at the Treasury security auctions (which pushed yields a bit lower than the levels they seemed headed toward), the upward trend has lost some of its steam and rates have eased a bit. Longer-term Treasury securities are back down by roughly 10 basis points or more week-over-week, and this probably reflects a slight turnaround in world investors’ confidence in the economic recovery. The price of a barrel of crude oil, which has pushed the cost of gasoline at the pump much higher in recent weeks, has edged back down a bit. The euro has gained slightly against the dollar. The only unwavering sign of concern, perhaps, is the price of an ounce of gold, which has climbed steadily higher. Gold is the ultimate safe haven for investor wealth—an indicator of investor concern, therefore—and the rising price continues to suggest that global investors are beset by many worries.

 

As long as the worries are in place, interest rates are fairly likely to remain close to where they are for some time to come. We have seen recently, though, that both interest rates and stock market indices (and some commodity prices with them) are capable of rising without much of a pause for a few weeks. This is very different from what rates were doing a month and more ago. They were up one day, down the next, as very uncertain investors went from optimism to pessimism and back.

 

The big questions remain unanswered. Will the jobs market begin a sustained recovery? Will consumers continue to act on their apparent willingness to make more retail purchases? And will real estate sales volume increase, especially with the end of the $8,000 and $6,500 home buyer tax credits approaching so quickly?

 

When it appears that we have answers, the markets will likely move sustainably in the direction suggested by those answers. Until then, the markets will wander without conviction.