In This Week's "Good News": Home Prices and New Home Sales Up For January
Although it is not overwhelmingly good news, it is a step in the right direction.
According to FHFA (Federal Housing Finance Agency), U.S. home prices climbed 1.7 percent on a seasonally adjusted basis from December to January.
The East North Central region posted the greatest increase, experiencing a 3.9 percent rise in home prices, while, not shockingly, the Pacific region dropped 0.9 percent, making it the worst performer.
The FHFA's monthly home price index is calculated using purchase prices of homes backed by mortgages that have been sold or guaranteed by Fannie Mae and Freddie Mac.
On top of this news, just released this morning by the Department of Commerce -- New Home sales numbers climb 4.7% for the month of February, shocking most economists.
Following this news, national homebuilder stock appears to be on the rise for the moment. Some of the stocks posting respectable gains include: KB, Pulte and Toll Brothers.
‘Jumbo' Financing Rates to Become More Competitive
Jumbo financing, which has largely been a thing of the past, is making a comeback.
In part, this comeback appears to be due to the announcement that the government will begin buying up ‘toxic assets'.
A number of major lenders are beginning to roll out programs that are specifically focused on loan amounts that exceed Conforming Conventional financing (balances over $417,000, and in High-Cost areas - balances exceeding $730,000).
The lender loan programs look to target the loan amount range of $730,000 min. to $1.5 million max., with mortgage rates in the upper 5% range.
Currently, the jumbo-conforming spread continues to remain high, but with conforming rates so low, it means more reasonable jumbo rates will likely follow, despite being offered at a premium.
As more banks and lenders enter the fold, rates on jumbo loans will likely be significantly pushed down, aiding the luxury-end of the market as well as hard-hit, costly regions of the United States.
This is great news for those home owners that are excluded from the recent release of the governments sponsored ‘Making Home Affordable" plan.
In This Week's "Take It How You Will" News:
Treasury To Buy $1 Trillion of "Toxic Assets"
In a plan just unveiled, the Treasury Department said it will remove up to $1 trillion in bad residential loans and toxic private-label mortgage-backed securities from the balance sheets of many financial institutions to jump start lending and revive the economy.
The plan will work like this:
Federal funding will be utilized to influence $500 billion in public-private funding to buy the assets, which the Treasury Department said could hit $1 trillion over time.
The objective is to utilize the private market to institute prices for assets which have halted trading or have had their market values plunge.
According to President Barack Obama, the plan will "allow banks to take some of their bad assets off their books, sell them into a market, but do so in a way that doesn't just obligate taxpayers to buy at whatever price they're willing to sell these assets."
Furthermore, Treasury Secretary Timothy F. Geithner said the public-private marriage is the most effective way to safeguard taxpayer money and get to the bottom of the financial crisis.
"Private investors will share the risk alongside with the taxpayer and the taxpayer will share returns," according to Geithner.
"There is no doubt that the government is taking risk," Geithner said, despite the fact "I am very confident that this scheme dominates all the alternatives for trying to find that balance" between cost to the government and effectiveness.
I am not particularly happy about his use of the word "scheme".
New FHA Head Named By President Obama
A former World Savings executive ( yes, I said World Savings), and current president of mid-Atlantic real estate company The Long & Fosters Companies, was selected yesterday by President Obama to run the FHA.
Here is a brief history of David H. Stevens: he began his career as a "loan originator" back in 1983 at World Savings Bank, before progressing to Group Senior Vice President, National Sales Manager for the mortgage division.
He then made his way over to Freddie Mac, where he served as Senior Vice President of the Single family business, responsible for all sales, marketing, business strategy, affordable lending, and product development for the firm.
Later, he ran the wholesale lending business nationally for Wells Fargo, before eventually making his way over to Long & Foster.
What I find interesting about this appointment by the President is the fact that, World Savings payment option arms killed Wachovia, Freddie Mac is in conservatorship, and Wells Fargo's wholesale presence is limited at best.
I hope that this is not a trend.
To be fair, it is still unclear if Stevens was involved with any of those toxic option arms World Savings spewed out, or if his advising in affordability products led to the decline of Freddie Mac, but let's hope he gets things right at the FHA.
As of late, the FHA has taken on what may be the most significant role in the mortgage industry, accounting for a staggering 21.13 percent of market share late last year and significantly more in recent months.
The good news is the FHA seems to be taking some risk mitigating actions, such as limiting cash-out refinances (which I covered in last week's newsletter) and stamping out seller-paid down payment assistance loans.
Per most recent estimates, FHA loan production for 2009 is projected to be as high as $400 billion; so he'll be plenty busy, especially with defaults rising above 6.5 percent.
In This Week's "Wait and See" News:
This week has seen somewhat significant gains across major U.S. markets, thus far. The gains are being mainly attributed to; the government's plan to buy up ‘toxic assets', a rise in durable goods orders (items that last 3 years or more), and an unexpected jump in new home sales.
As a result of this news, market numbers ended Wednesday like this: DOW up @ 7749.81 (+89.84), NASDAQ up @ 1528.95 (+12.43) and the S&P up @ 813.88 (+.95).
Of significance for the rest of the week; look for Personal Income and Personal Spending numbers (both March 27), to add some market volatility. I expect that both will come in lower than expected.
Of significance next week, look for Consumer Confidence numbers (March 31), Crude (oil) Inventories (April 1), and Factory Orders (April 2) to cause some significant market shifts.
Next week's Economic Calendar:
Week of March 30 - April 03
Date | ET | Release | For | Prior |
Mar 31 | 09:00 | Consumer Confidence | Mar | 25.0 |
Mar 31 | 09:00 | S&P/Case-Shiller Home Price Index | Jan | -18.55% |
Mar 31 | 09:45 | Chicago PMI | Mar | 34.2 |
Apr 01 | 08:15 | ADP Employment Change | Mar | -697K |
Apr 01 | 10:00 | Construction Spending | Feb | -3.3% |
Apr 01 | 10:00 | ISM Index | Mar | 35.8 |
Apr 01 | 10:00 | Pending Home Sales | Feb | -7.7% |
Apr 01 | 10:30 | Crude Inventories | 03/27 | +3300K |
Apr 01 | 14:00 | Auto Sales | Mar | 2.9M |
Apr 01 | 14:00 | Truck Sales | Mar | 3.5M |
Apr 02 | 08:30 | Initial Jobless Claims | 03/28 | NA |
Apr 02 | 10:00 | Factory Orders | Feb | -1.9% |
Apr 03 | 08:30 | Average Workweek | Mar | 33.3 |
Apr 03 | 08:30 | Hourly Earnings | Mar | 0.2% |
Apr 03 | 08:30 | Nonfarm Payrolls | Mar | -651K |
Apr 03 | 08:30 | Unemployment Rate | Mar | 8.1% |
Apr 03 | 10:00 | ISM Services | Mar | 41.6 |