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Shamun Mahmud
Commercial Capital Limited
10800 Main Street
Suite 150
Fairfax, VA. 22030
shamun@betterloansNOW.com
(703) 879 - 1779
(800) 460 - 1921 | 
| We are one of the few National Financial Institutions that specialize in helping businesses find, qualify for, and, finance a dwelling of their own. We fund loans from $500,000 to $50M. Ask us about our fast-track commercial mortgages! |
| July 7, 2009 
 When 40% is not 40%
Mercifully, the first half of the year is over. We are still officially in recession, but there are signs that the economy has bottomed. Last week’s employment report reminds us that we are not rebounding as of yet. We need to keep the numbers in perspective. For example, during the first half of the year, the S&P 500 rallied close to 40% from the low hit earlier this year. All told, the S&P 500 dropped almost 60% from the all-time high reached nearly two years ago. This does not mean that the stock market is close to "recovery." In rounded numbers, 60% of 1500 represents a drop of 900 points. An increase of 40% from 640 is only 260 points. This means we have a long way to go. Expect the same recovery "mathematics" for housing prices. We would not be surprised if the recovery causes housing prices to move up 15% or so from their ultimate lows. However, a move upward of 15% would not come close to the 25% drop we have experienced. Keep in mind that even if prices are down 25%, they are still up 70% from 1985. Of course, these are not inflation adjusted numbers. The point is, we all need to keep statistics in perspective. Losing 400,000 plus jobs in a month represents horrific numbers. But they are much improved from the 741,000 jobs we lost in January. If there is any good news regarding these numbers, it is the fact that rates and oil prices are lower than they were two weeks ago. We can’t emphasize enough times that keeping rates low will facilitate the recovery. 
 The Markets. Rates moved lower in response to weak economic reports in the past week. Freddie Mac announced that for the week ending July 2, 30-year fixed rates averaged 5.32%, down from 5.42% the week before. The average for 15-year fell to 4.77%. Adjustables were mixed with the average for one-year adjustables increasing slightly to 4.94% and five-year adjustables decreasing to 4.88%. A year ago 30-year fixed rates were at 6.35%. “Mixed economic reports on the state of the housing market helped hold rates fairly flat this week,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Lower rates are helping to support the housing market,” said Frank Nothaft, Freddie Mac vice president and chief economist. “30-year fixed-rates peaked this year over the week of June 11 and are now around a quarter-of-a-percentage point lower this week. This has led to a 7.2 percent increase in conventional applications for home purchases by the last full week of June, according to the Mortgage Bankers Association. The decline in house prices may be moderating as well. Home values fell at a monthly rate of 0.6 percent in April, representing the smallest decrease since June 2008, according to the S&P/Case-Shiller® 20-city composite index. In addition, home prices rose in eight of the cities in April.”
Current Indices For Adjustable Rate Mortgages
Updated July 3, 2009 | Daily Value | Monthly Value | | July 1 | May | | 6-month Treasury Security | 0.33% | 0.30% | | 1-year Treasury Security | 0.54% | 0.50% | | 3-year Treasury Security | 1.57% | 1.39% | | 5-year Treasury Security | 2.51% | 2.13% | | 10-year Treasury Security | 3.55% | 3.29% | | 12-month LIBOR | | 1.701% (May) | | 12-month MTA | | 1.210% (May) | | 11th District Cost of Funds | | 1.380% (April) | | Prime Rate | | 3.25% (Dec) | 
 The seeds of a housing recovery have already been planted, according to a report released recently. In fact, many of them were sown starting around 1979. According to an annual state of the nation’s housing from Harvard University’s Joint Center for Housing Studies, once the U.S. emerges from recession, strong demographic trends will restore health to the housing market. The key is echo boomers, the 75 million Americans born between 1979 and 1995. "There will be 5 million more echo boomers than there were boomers when they first started swelling housing markets," said Eric Belsky, executive director of the Joint Center. As a result, household growth during the next 10 years should range between 12.5 million and 14.8 million, according to the report. All those new households mean demand for many new housing units. "This is a powerful, powerful underpinning of future demand," said Belsky. Source: CNN/Money
Housing confidence is up amid increasing evidence that the market is turning around. The Adversity Index from MSNBC.com and Moody’s Economy.com reported signs of a turnaround in 33 of the nation’s metro areas. While that’s less than 10 percent of all metro areas, it’s still significant, says economist Andrew Gledhill of Economy.com. "There are signs out there that builders are growing modestly more confident about their prospects,” he says. Vallejo, Calif., where housing starts are up 440 percent compared to a year ago, leads the list of improving metros. In Longview, Tex., housing starts increased 263 percent. Others metro areas at the top of the list are Lawrence, Kan.; Ann Arbor, Mich.; Kokomo, Ind.; and Clarksville, Tenn. Housing prices are also increasing in 140 metro areas compared to a year ago. The greatest increase was in Elmira, N.Y., where prices were up 10 percent compared to a year ago. Source: MSNBC Fannie Mae and Freddie Mac have received the green light from their regulator to refinance underwater homeowners whose loans are as high as 25% greater than the value of the home. The special refinance plan that Obama administration officials unveiled in February limited the option to loans 5% greater than the value of the home. The higher limits will allow more homeowners to strengthen their finances by taking advantage of lower rates," Federal Housing Finance Agency director James Lockhart said. Fannie Mae said it would accept delivery of the higher limits starting Sept. 1. A Freddie Mac spokesman said it would start accepting the loans "now." The GSE financing program is only available to borrowers with loans that are owned or guaranteed by Fannie and Freddie. They also have to be current on their payments. Source: National Mortgage News |
