20080105 - Where did all the jobs go?

The numbers:
30 yr – 6.07% w/ 0.5% in fees. UP from 5.96%. 1 yr ago - 6.18%
15 yr – 5.63% w/ 0.6% in fees. UP from 5.65%. 1 yr ago – 5.94%
5/1 ARM – 5.78% w/ 0.5% in fees. UP from 5.75%. 1 yr ago – 6.02%
1 yr ARM - 5.47% w/ 0.5% in fees. UP from 5.46%. 1 yr ago – 5.42%
(Average mortgage rates according to Freddie Mac’s Primary Mortgage Market Survey®, as of 1-3-08)

Note: These rates should be used for trend line analysis only, NOT for comparison shopping. Your rate will vary depending on multiple factors. In general, this simply helps demonstrate which direction mortgage rates have moved from week to week.

Happy New Year to All. Welcome 2008 and all its prosperity, happiness and joy that it brings to each and every one of you. Can you tell I’m starting the year off with a mindset of abundance, joy and high expectations? Why not? The contrary mindset just stinks.

Summary: It’s about a month since our last report. On average, rates are up about 1/10 of a percent from a month ago and mixed, but very near one-year ago levels. Rates are still near historic lows and as I’ve repeated in the past…if anyone complains about rates, they should be smacked! These are beautifully low rates, conducive to taking advantage of a great buyers market. If you think real estate will be worth more in 10 years, and you’re a long term investor and you have good credit, it’s a golden time in the real estate industry…especially if you’re a buyer. “How much money will you make on real estate you don’t own?” is a great quote that I’ve just recently picked up from author Robert Helms, co-author of the book, Equity Happens. I’m getting off topic..and it’s only the first paragraph…

Recent economic reports have showed a continuing slowdown in the economy which bodes well for an improvement (lowering) in long term interest rates in the next week’s survey. While nothing it guaranteed, next week’s averages will likely be a touch lower. Employment was woefully lower in December, manufacturing is still slowing and the latest housing data provides mixed signals in its direction.

Housing: While new home sales fell in November to the slowest pace since April 1995, 647,000 annualized units. Existing home sales rose by a small margin to an annual pace of 5 million units. Some of the latest forecasts call for total home sales continuing to decline in the first quarter of the year before starting a slow recovery. Sales of new and existing homes are projected to be 5.09 million in 2008, a decline of more than 11 percent from 2007.

Consumer Confidence: Consumer attitudes continue to be lower. During the week ending December 23, the weekly ABC News / Washington Post fell to a -23 reading, a near low for 2007. The Conference Board's readings of Consumer Confidence for December improved slightly from November to an 88.6 reading in December. Although improved, still low.

Mortgage Industry: The process of figuring out how many losses there will be as a result of the Mortgage Meltdown of 2007 will continue for the next several months. Qualification for new mortgage money will continue to tighten, albeit at not such a rapid pace of retraction we had over the past few months. Bottom Line: good quality borrowers have not been impacted and there is readily available money for those with the best and even average financial qualifications. Home sales can't really recover until mortgage markets are better functioning, and that won't happen before losses are all accounted for, a firm grasp of future risks are realized and the financial market players begin to trust one another again.

Employment: The often big, market moving employment reports are released on a monthly basis. This past Friday revealed the employment picture for December 2007. BLEAK! Forecasts called for 70,000 new jobs to be created in December, over 50% lower than November. The actual numbers were not even close. The report indicated only 18,000 new jobs were created in December 2007. Overall, a huge drop from November. While this is a negative report and will very likely impact average mortgage rates next week, it is often best to take a step back and gain a larger perspective of these things. For 2007, over 1.3mm new jobs have been created, which is not all that bad. Just as we report mortgage rates on a frequent basis, these monthly employment reports should be viewed as a simple snap-shot and not the end-all be-all. However, should the trend continue, then there is real concern. After-all, jobs are the lifeblood of everyone’s economy. The report also revealed that average wages rose 0.3% and that the overall unemployment rate rose from 4.8% to 5.0%. Overall, still a good number, however, the overall tone of the report and low new jobs numbers will likely help rates improve next week.

Thought of the Week: “How much money will you make on real estate that you don’t own?” - Robert Helms