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News affecting VA streamline refinances

10/21/2009

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Equities are looking to extend yesterday’s losses in this morning’s pre-trading session. The data schedule is light today with no major releases scheduled to hit markets in the morning, although in the afternoon investors will eye the Fed’s Beige Book, a comprehensive, anecdotal report on economic conditions across all 12 Federal Reserve Districts.

Just before 7:00, the Dow is trading 47 points lower after shedding 5o points yesterday, putting the industrial led index just below the 10,000 threshold. S&P 500 futures are trading 5.7 points lower at 1,083.70.

As the dollar continues to rebound from 14-month lows, spot gold has fallen to $1,058.50 per troy ounce. The euro has once again failed to break past the key $1.50 level. 

In earnings, investors will be focusing on Q3 reports from Wells Fargo and Morgan Stanley, among others.

Key Events Today:

2:00 ― The Fed’s anecdotal summary of economic conditions, the Beige Book, should confirm broad improvement in the economy across most Federal Reserve districts. Growth is uneven between districts, however, and commercial real estate activity is suffering across the nation.

“The report is likely to emphasize that government aid has underpinned the recovery and that the prospect for strong growth once support is withdrawn remains uncertain,” said analysts from Nomura. 

The Beige Book from September 9 said the economy “continued to stabilize in July and August,” but officials noted that “labor market conditions remained weak across all Districts.”

4:30 ― Eric Rosengren, President of the Boston Fed, speaks on regulatory and monetary policy as he opens the bank’s annual Cape Cod economic conference in Chatham, Massachusetts. 

 
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Economic news affecting VA mortgage rates

10/14/2009

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Retail sales were better than anticipated in September as broad based gains helped offset a 10.4 percent decline in motor vehicle sales.

Total retail sales declined by 1.5 percent in September, less than the 2.1 percent drop economists had forecast. Excluding auto sales, which experienced their largest monthly fall since August 2005, retail sales were 0.5 percent higher in September, better than forecasts for a 0.2 percent increase.

Economists expected the expiration of the government's Currency for Clunkers rebate program to drag down the monthly change in total retail sales, however a 1.4 percent gain in home furnishing sales, a 1.1 percent increase in gasoline sales, a 0.9 percent boost in grocery sales, as well as a 0.9 percent improvement in general merchandise purchases helped offset the anticipated decline in auto sales.

There is a lot of optimism in the economic forecast released by the Mortgage Bankers Association (MBA) on Monday, but a lot of realism .

The association expects economic growth to continue for the rest of this year but to slow down again during the first half of the next. The MBA says real GDP which will be a negative 0.5 percent in 2009 despite gains in the second half of the year will rise to about 3 percent in 2010

Jay Brinkmann, MBA's chief economist and senior vice president for research and economics said, "The recession is behind us but the effects of the recession will linger for some time in the form of higher unemployment, and lower levels of business investment and home construction. Six of the gigantic questions regarding growth will be the behavior of consumers. The large losses of consumer wealth in the form of reduced home values and stock market losses, as well as the absolute losses of income resulting from unemployment, reduced employment and the fear of unemployment have constrained consumer spending."

While lots of forecasters are saying that employment is improving, MBA sees unemployment continuing to climb, reaching 10 percent from the current 9.8 percent by the finish of the year and peaking at 10.2 percent before it begins to decline at the midpoint of 2010.

The rate of existing home sales this year is expected to be 2 percent higher than in 2008 and will increase another 11.2 percent during 2010. However, new home sales for 2009 will be down by about 18 percent relative to 2008. Sales seemed to have bottomed in the first quarter of 2009 and have been rebounding modestly since. This should improve next year; new home sales should post an increase of around 21 percent from 2009's low levels.

The forecast projects that mortgage rates will remain stable at around 5 percent through the finish of the year but will rise to around 5.6 percent by the finish of 2010. The low rates will spur refinancing which are expected to hit $1.25 trillion by the finish of 2009 from $777 billion in 2008. As rates rise, however, the refinancing boom will slow to around $745 billion next year. All originations, however, are expected to reach $1.5 trillion as modest increases in home sales compensate for the decline in refinancing. Purchase originations this year are about 2 percent below the level of 2008 but should rise next year by about 12 percent from the total the 2009 figure of $718 billion.

Brinkmann stated, "Timing of the economic recovery is much tied to the growth in consumer spending. In addition, the effect of the bulk of the federal stimulus package, the construction components, is not expected to be felt until 2010.

The drop in home prices nationally may finally reach an finish by early next year but that will vary by locality and home value with demand expected to be highest for entry level homes.

"Perhaps the biggest unknown is the level and volatility of interest rates. While the lack of inflation, high unemployment and excess capacity in the economy should hold interest rates down, there is a lot of uncertainty regarding rates immediately following the termination of the Federal Reserve's purchase of mortgage-backed securities. No doubt the Fed will do its best to minimize adverse effects, but the elimination of these purchases will put upward pressure on all long-term rates as well as the spread between mortgage rates and Treasuries. The size of any resulting rate move will largely choose the size of the refinance mark
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Economic news affecting VA mortgage rates today

10/7/2009

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Equity markets look poised to extend the two-day rally this morning. The day ahead is light on data, with only the consumer credit report at 3pm, but Q3 earnings reports also kick off after the bell beginning with Alcoa. 

Broad gains in the Asian session ― +1.11% in the Nikkei and +2.07% in the Hang Seng ― are increasing sentiment that a global recovery is underway. Even as equities rally, the dollar remains weak, helping gold prices reach fresh record highs.

“Gold prices are now front and centre, drifting further into record territory at US$1,047/oz this morning alongside a still-weakening U.S. dollar,” said analysts at BMO Capital Markets. They added that commodity currencies, such as the Canadian dollar, are “particularly strong.” 

Also, at 7am markets learned that that average rates for a 30-year mortgage remained below 5% for the third consecutive week. That helped the MBA’s Market Composite Index, a measure of mortgage loan application volume, increase 16.4% last week.

“Although there seems to be limited room for further declines in mortgage rates, a last minute rush by first homebuyers who are qualified for the one-time tax credit may boost purchase filings,” said analysts from Nomura.

Key Events Today:

10:00 ― House Financial Services hearing on Derivatives.

2:30 ― Senate Banking Committee hearing on “Securitization of Assets: Problems and Solutions.”

3:00 ― Consumer Credit isn’t often a key report, but banks are holding standards tight and consumers are shifting to savings mode, which gives this monthly report additional emphasis. In July credit outstanding fell by a record $21.6 billion, but though the underlying pace of contraction appears to be accelerating, analysts believe credit should fall by “only” $8.5 billion in August due to the success of the cash-for-clunkers incentive program.

“For the long term, lower US consumer borrowing is clearly a positive and will likely be an important part of rebalancing the global economy,” said analysts from Nomura Global Economics. “For the short-term, however, efforts to reduce debt are a negative for consumer spending, all else equal. If the aggressive pace of debt repayment continues, it may hinder the ability of the economy to emerge from recession.”

  • Treasury Auctions:
  • 1:00 ― 10-Year Notes ($20 billion)
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Jobs report comes in much worse than anticipated--va loan rates

10/2/2009

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The economy shed more jobs than Wall Street was expecting in September, sending equity futures south in search of a bottom after three straight days of sell-offs. The monthly employment report said 263,000 jobs were lost in September, almost one-hundred thousand worse than the market forecast.

Job cuts pushed the unemployment rate up one-tenth to a fresh 26-year high at 9.8%. That rate is made worse knowing the average duration of unemployment also sits at a record high of 26.2 weeks. Indeed, more than one-third (35.6%) of the unemployed have been jobless for 27 weeks or more.

Since the recession hit the economy in December 2007, the number of unemployed persons has increased by 7.6 million to 15.1 million, and the unemployment rate has doubled.

“The axe swung hard and it swung wide,” said Jennifer Lee from BMO Capital Markets. “All industries, save information, passed out pink slips during the month.” 

Job losses in September were worse than August’s decline of 201,000, but a wider lens shows that declines have moderated significantly from earlier in the year. Average monthly losses from May to September were 307,000, less than half the average of 645,000 per month from November 2008 to April. 

The report also said average workweek hours was cut back slightly, while earnings only advanced marginally (details below.) 

“The economy went off-roading in September, but will get back on road to recovery,” Lee added.

Losses by Sector:

Construction jobs fell by 64,000 in September, just below the monthly average of 66,000 for the past five months and well below the average of 117,000 per month from November to April. In line with yesterday’s construction spending report, the losses were concentrated in the nonresidential side (-39,000) and heavy construction (-12,000). Since December 2007, employment in construction has fallen by 1.5 million.

Manufacturing employment declined by 51,000, in line with the three-month average of 53,000 per month, and well below the monthly loss of 161,000 from October to June. Employment in manufacturing has contracted by 2.1 million since the onset of the recession.

Jobs in the service sector fell by 39,000, 10k more than the average from April to September. That’s still a moderation from the average monthly loss of 68,000 in the prior 6-month period.

Government employment slashed by 53,000 in the month, with the largest decline occurring in the non-education component of local government

(-24,000).

Health care was the only sector continuing to increase in September. About 19,000 were created in the month, with the largest gain occurring in ambulatory health care services (15,000). Since the start of the recession, the health care sector has added 559,000 jobs to the economy.

Other: Jobs in transportation and warehousing continued to trend down in September; little or no change was seen in the financial sector, professional & business services, leisure & hospitality, and information.

Other Key Details:

The average workweek edged down by 0.1 hour to 33.0 hours. (Both the manufacturing workweek and factory overtime decreased by 0.1 hour, to 39.8 and 2.8 hours, respectively.)

Average hourly earnings edged up by 1 cent, or 0.1%, to $18.67. Over the past 12 months, average hourly earnings have risen by 2.5%, while average weekly earnings have risen by only 0.7% due to declines in the average workweek.

“For the quarter, aggregate hours were down -3.0% at an annualized pace, an improvement versus Q2’s -7.8% annualized decline,” said Joseph LaVorgna, chief US economist at Deutsche Bank.

The number of discouraged workers ― those not currently looking for work because they believe no jobs are available ― rose to 706,000 in September, a rise of 239,000 compared to last year.

The all-in unemployment rate (basic rate + discouraged workers + involuntary part-timers) rose two-tenths to a record 17%.

Also note that annual benchmark revisions indicated that earlier cuts were even deeper than originally reported. The new estimates say 824,000 more jobs were cut than previously thought, which is the largest downward revision since records began 25 years ago.

Market Reaction: 

Markets saw a huge sell-off yesterday and that was only on mixed news. Today’s report is genuinely bad so another sharp decline should be expected. Equity futures were already trading lower prior to the release. The worse-than-expected figures caused the decline to deepen.

“The trajectory for jobs looks weak heading into 2010, and we continue to recommend taking profits in long positions in stocks,” said analyst John Herrmann after the report. “Stocks may have hit their highs for the year in September 2009.”
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Economic news affecting VA mortgage rates

10/1/2009

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Three weeks of moderating jobless claims have come to an end as initial claims for unemployment benefits rose 17,000 to 551k in the week ending September 26.

Forecasters were expecting 537k claims. The weekly figures can be volatile so it’s no real surprise, only disappointment that another downward surprise was not in store. The prior week’s level, revised up 4k to 534k, was the lowest since early July.

The good news was that continuing claims ― the tally of those still receiving benefits ― fell 70k to 6.090 million.

“The outlook for 2H-2010 economic growth crucially hinges on an end to net job cuts over the coming three months,” said John Herrmann, president of Herrmann Forecasting. “Extremely powerful productivity growth suggests this could happen, but a jobless recovery coupled with a failure to expand credit would muffle real GDP growth in 2H-2010 – in such a case, the upside to stock valuations may be more muted.”

Even with this week’s climb, the 4-week average moved down to 548k. That suggests tomorrow’s employment report will show moderating job losses in September, as the weekly average for August was 569k.

"The 4-week moving average peaked at 659k in April so the 100k+ decline since then is noteworthy and consistent with what should be a more noticeable improvement in payrolls,” said Joseph LaVorgna, chief US economist at Deutsche Bank.

The market forecast for Friday’s report is for 170,000 jobs to have been lost in the month, compared to 216,000 in August. Forecasts could change after 10am when the closely watched ISM survey of manufacturing conditions is released.
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