My New Blog

U. S. Investor’s happy thoughts paid off in this busy week of positive economic reports. Personal Consumption grew by .04 per cent in March up from the previous month (could it be from feeding our cars?), manufacturing activity continued to grow, and our exports increased. The Gross Domestic Product, the leading indicator for “are we or are we not in a recession”, first quarter results says no, we are not in a recession, but just barely. The Fed dropped their rate as expected by .250 (Does not effect the mortgage rates!). The employment numbers today were not good, but much better than expected, dropping the unemployment rate. (Does affect the mortgage rates and not for the better). Across the globe our dollar strengthened and the stock market went above 13,000 for the first time since January fueled by technology and believe it or not, financial stocks. If the economy regains momentum that will be great news for all of us involved in real estate.

FYI: Warning! Soap Box ahead: Food Prices have risen as much as 45% in some countries. The U. S. food reserves are depleted due to our farmers making big bucks selling to the open markets, as reported by USA Today. There have been riots in Italy because of the shortage of wheat. In Viet Nam the rice farmers make more money shipping their grain overseas than selling to their own vendors. How can this be? What happened? Ethanol for one. The alternative fuel has turned into a monster of a grain guzzler. How can the smartest people in the world invent devices that we pay to carry around in our pockets, to listen to music or watch movies, yet we cannot invent cheap, safe alternatives for gasoline that would not include the life line for many? Or invent food sources that will feed our planet? Do we have the technology, and choose to ignore it because certain groups would not make a profit?

No one was sending roses to the U. S. bond markets this week after the 10 year treasuries (30 year fixed rates) were kissed by an ugly stick. The “stick” was the revision of the first quarter Gross Domestic Product (What we are buying; How much are we paying; If the products we are shipping outside of our borders , exports, is balanced with the products we are bringing in, imports) indicating our economy is stronger than originally reported. Investors did the happy dance in their Manolo Blaniks (visual) and left the safe haven of the treasuries for the stocks that would give a bigger pay day. The president of the Dallas Federal Reserve also stated the Fed would raise the Fed rate sooner than later if inflation continues. As a result the 30 year fixed rates went up.

FYI: With the Euro so strong against our dollar, some companies are enjoying the benefits. Tiffany and their little blue boxes filled with not-so-expensive-jewels-if –you-are-from-Europe-and-buy-them-in-the-U.S., is projecting good profits. Also Disneyland and Disneyworld are enjoying a whopping 25% increase of foreign visitors to their theme parks.

A Greasy Spoon story as reported in today’s New York Times: Restaurants last year had to pay to have their left-over grease taken away. Now they have to lock up their cooking oil because of grease thieves that siphon it during the night and trade it to the commodities markets for biodiesel fuel.

Mortgage Note: Fannie Mae, the largest purchaser of conforming loans, is changing guidelines June 1^st. If the loan is not already fully underwritten approved, the loan will have to be resubmitted under the new guidelines. If you contact our office on Monday and hear Carney folk and wild animals in the background, it is because we made the decision that starting our own circus will be easier than doing loans.

This weekend, we will be parking our gas thirsty SUV and walk to the movies to see Indiana Jones. Sticker shock took on a whole new meaning with gasoline in the United States hitting $4.00 a gallon and $9.00 a gallon in Europe (it is not a typo). After our long walk to the theater (since public transportation in Maricopa County is a challenge) we will be watching Indy without our snacks since popcorn prices have increased due to the shortage of corn. That’s okay; we were getting a little chunky anyway.

The markets are absorbing the dramatic increases in oil and food prices with the stock market having a good week overall. The Fed’s released minutes from their April 30^th meeting and the minutes stated that the Fed will probably not reduce the Fed rate any lower this year. Any bets on if they will be able to keep their forecast?

FYI: Civics 101: A bill has to have a majority vote by both the Senate and House before it goes to the President for a signature. The housing legislation bill is still being modified but is likely to pass in the next couple of weeks. One of the proposals is to allow loans to be refinanced for the new appraised value, as long as the existing lender will allow the “short” refinance. The new lenders will call 1-800-Good LuckInFindingTheRightPersonToMakeThatDecision.

Is that the sun peaking through the clouds? Housing resales in some communities are showing signs of recovery, mainly spurred by sales of REO’s. Wednesday’s Consumer Price Index indicated that the prices we are paying are in line with what we are making, therefore keeping the big “I” (inflation) away from the door. Today’s construction starts showed a surprising gain, the strongest showing in two years. New apartment complexes were the cause for the increase, not residential housing. Secretary of Treasury, Hank Paulson, stated that the financial markets are improving. Ben Bernanke, Fed Chair, speaking at a Fed conference in Chicago, is encouraged by financial institutions recent liquidity, and strongly suggested they continue to build up “generous cushions”.

What about those clouds? Oil prices that affect our cars and other products and food prices for our three squares a day are kicking the housing market out of headlines.

FYI: Fannie Mae announced today that they are re-implementing nationally the 95% and 97% LTV loans with a new “risk based” module. Everyone is so excited! The soothsayers are telling us that it means: Only individuals with stellar credit, income, little debt, and are willing to pay the high mortgage insurance monthly fee, will qualify for the 97% LTV. Has Fannie notified the Mortgage Insurance companies to let them in on this “great” news?

The International Money Fund issued a statement today stating the main worries for our globe today is inflation. Food and Energy (oil) costs are at an all time high and it is not just the third world countries that are at risk. The rising costs will affect all of us. Some analysts are predicting that gas will be over $4.00 per gallon to celebrate the summer travel season. Hmmm….coincidence? The U. S. can spend a trillion dollars to start a war in Iraq, send tax rebates to millions, yet we cannot figure out how to lower the cost of gasoline?

The House of Representatives passed the controversial Homeowners Aid Package. The nitty-gritty of the bill is asking current lenders to reduce the principal balance of homeowner’s home loans in declining markets, so they can refinance at a fixed rate with an FHA loan. It now has to go to the Senate and then the President before it becomes law. It has become a “party bill” and not one that serves margaritas. Most Republications are against, the Dems for. Bets are on that as the bill stands now, it will not pass the Senate and President Bush says he will veto. So just so we can understand…. the government can step in and save Bear Stearns, give the banks cheap money to borrow, and the current lenders can still sell the foreclosed homes to recoup a few bucks, yet coming up with a viable solution (quickly) for current homeowners to save their homes in not an option?

FYI: FHA will change the upfront mortgage insurance effective July 14. Currently all FHA homeowners pay 1.50 percent of their base loan amount that is added into the loan. The new upfront mortgage insurance will be a sliding scale from 1.25 to 2.25 percent depending on the loan size, down payment and credit score.