Economic Outlook

As the pressure for higher mortgage rates has increased in recent weeks, investors have speculated that the Fed would step in to "defend" certain interest rate levels, but that hasn't happened. This week, Fed officials explained that their mortgage-backed securities (MBS) purchases are designed to support the mortgage market and not to set rates. The Fed's MBS purchases of $25.5 billion this week were similar to levels seen in recent weeks. Disappointed that the Fed hasn't increased its quantity of asset purchases, investors sold MBS this week, and mortgage rates moved higher.

A number of factors have been developing which typically push interest rates higher. The coming supply of debt needed to pay for government programs will compete for investor funds. Despite strong demand for this week's large Treasury auctions, investors are concerned that higher rates will be required in the future. In addition, an improved economic outlook has made investors more willing to move funds to riskier assets and away from safer assets such as bonds. It also means that higher inflation may be a concern sooner than previously expected.

The difference between short-term and long-term rates reached record spreads during the week. With the Fed-controlled fed funds rate close to zero, short-term rates remained low. Long-term rates, which are market-controlled and influenced by investor expectations, rose significantly. A wide yield curve spread is often found during periods when the economy is strengthening.

Other key factors:

• April Existing Home Sales increased 3% from March


• May Consumer Confidence rose to the highest level in eight months


• Continuing Jobless Claims climbed to a new record high


• Oil prices rose to $66 per barrel, the highest level of the year

NEXT WEEK'S FORECAST

Next week, the important Employment report will come out on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Early estimates are for a loss of about 550K jobs in May. Before the Employment Data, the ISM index, Personal Income, and Construction Spending will come out on Monday. Pending Home Sales, a leading indicator for the housing market, will be released on Tuesday. ISM Services will be released on Wednesday, and Productivity is scheduled for Thursday. Fed Chief Bernanke will be testifying on Wednesday.

This Week's Economic Outlook

Tuesday's bond market opened in positive territory but has since slipped into negative ground after today's only relevant economic data showed a much higher than expected reading. The stock markets are rallying with the Dow up 170 points and the Nasdaq up 46 points. The bond market is currently down 3/32, which will likely push this morning's mortgage rates higher by approximately .125 of a discount point.

The Conference Board gave us the news that is pressuring bonds and boosting stocks. They said late this morning that their Consumer Confidence Index (CCI) spiked to 54.9 this month, greatly exceeding forecasts. Analysts were expecting to see a reading of approximately 42.0, meaning that consumers were much more optimistic about their own financial situations than many had thought. This is negative news for bonds because rising confidence usually translates into higher level of consumer spending, which fuels the economy.

The National Association of Realtors will give us the Existing Home Sales report late tomorrow morning. This data tracks resales of homes in the U.S., giving us a measurement of housing sector strength. However, it is not considered to be of much importance to the bond market unless it varies greatly from forecasts. Current forecasts are calling for a small increase in sales between March and April.

Overall, I think we have a busy week ahead of us. The big reports of the week were today's CCI and Thursday's Durable Goods Orders data. If Friday's GDP revision varies greatly from forecasts, it can also lead to sizable changes in rates.

There are also a couple of Treasury auctions that are also worth noting. The 5-year sale Wednesday and the 7-year auction on Thursday may influence bond trading and possibly mortgage rates if they are met with an exceptional demand or if there is lackluster interest from investors. There is a pretty good possibility of seeing mortgage rates change several times this week, so please proceed cautiously if still floating an interest rate.

Economic Outlook

While weaker than expected economic data pushed mortgage rates lower last week, concerns about the coming supply of debt needed to pay for government programs moved mortgage rates higher this week, leaving rates nearly unchanged over the past two weeks.

This week, the economic data had little impact, but mortgage rates moved higher for a variety of other reasons. The Treasury announced a huge $101 billion in auctions next week, meaning additional supply for the market to absorb. Compounding the problem, the UK was placed on the watch list on Thursday for a possible downgrade of the credit rating for its debt, due to its high level of government debt. A lower credit rating implies greater risk, pushing yields higher. Investors are now concerned that the US also may be at risk of a downgrade. Finally, there was hope that the Fed would step up its asset purchases, but the Fed held steady its level of Treasury and mortgage-backed security (MBS) buying this week, disappointing many investors.

The housing data released this week was mixed. While April Housing Starts and Building Permits fell to record lows, the weakness came from multi-family units. Construction of single-family homes actually rose 3% from March, its second consecutive monthly increase. In addition, the National Association of Home Builders (NAHB) May confidence index rose to the highest level since September 2008.

Last week, the Secretary of the Department of Housing and Urban Development (HUD) announced that home buyers would be able to use the $8,000 first-time homebuyer tax credit for down payments on FHA loans through the use of bridge loans. HUD also posted the information on its website (HUD Mortgagee Letter 09-15). Since then, HUD has completely removed the information from its website. While no official explanation has been given, it appears that HUD and the IRS need more time to research the details of the program before moving forward.

This Week's Economis News

This week brings us the release of only two pieces of economic news in addition to the minutes from the last FOMC meeting. Neither of the economic reports can be considered of high importance to the markets and mortgage rates, so we may see a fairly calm week for mortgage rates.

April's Housing Starts is the first data of the week but is the less important of the two. This data measures housing sector strength and mortgage credit demand by tracking new permits and actual starts of new home construction. It is expected to show a small increase in new starts from March's readings. But, since this report is not considered to be of high importance to the bond market, it likely will have little impact on mortgage rates unless it varies greatly from forecasts.

There is no relevant economic news scheduled for release Wednesday, but we will get to see the minutes from the last FOMC meeting. Market participants will be looking for how Fed members voted during the last meeting and any comments about inflation concerns in the economy. The goal is to form a guess about when the Fed may make another move to help the economy. The minutes will be released at 2:00 PM ET, so if there is a market reaction to them it will be evident during afternoon trading.

The last data comes late Thursday morning with the release of April's Leading Economic Indicators (LEI) at 10:00 AM ET. This Conference Board report attempts to measure economic activity over the next three to six months. It is expected to show a fairly large increase of 0.7% from March's reading, meaning that economic activity is likely to gain momentum during the next few months. A decline would be good news for the bond market and mortgage rates, while a larger increase could cause mortgage rates to inch higher Thursday.

Overall, I think it will be a fairly calm week for mortgage rates, at least compared to last week. We could see little movement in rates if the stock markets remain calm and the week's data doesn't reveal any major surprises. The FOMC minutes may lead to some volatility in the markets, but neither of the economic reports are of great concern.

Also worth noting is an early close in the bond market Friday afternoon ahead of the Memorial Day Holiday Monday. These early closes sometimes lead to additional volatility in bond prices as investors prepare for the long weekend and trading thins with many traders starting the weekend early.

This Week's Economic News

There are several important pieces of economic news scheduled for release this week, but three stand out above the others. There are a total of six reports scheduled, so it can be considered a fairly active week. There is no relevant data due out tomorrow, so expect the stock markets to help drive bond trading and mortgage rates.

March's Goods and Services Trade Balance report will be released early Tuesday morning. This report gives us the size of the U.S. trade deficit but likely will not have much of an impact on the bond market or mortgage pricing. It is the least important of this week's data.

The first important piece of data is the release of April's Retail Sales early Wednesday morning. This is an extremely important report for the financial markets as it measures consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, this data can have a pretty significant impact on the markets. Current forecasts are calling for a 0.1% decline in sales from March to April. A weaker than expected level of sales should push bond prices higher and mortgage rates lower Wednesday. However, a larger increase could fuel bond selling and lead to higher mortgage rates.

The second important report of the week is April's Producer Price Index (PPI) early Thursday morning, which helps us measure inflationary pressures at the producer level of the economy. If this report reveals weaker than expected readings, indicating inflation is not a concern at the producer level, we should see the bond and stock markets rally. The overall index is expected to show an increase of 0.1%, while the core data that excludes food and energy prices is also expected to rise 0.1%. A smaller than expected increase in the core data would be ideal for mortgage shoppers.

There are three relevant reports scheduled to be posted Friday. The first is the week's most important. April's Consumer Price Index (CPI) will be posted at 8:30 AM. It is similar to Thursday's PPI report, but measures inflationary pressures at the more important consumer level of the economy. Its results will be watched closely and can lead to significant volatility in the bond market and mortgage pricing. Current forecasts are calling for no change in the overall index and a 0.1% increase in the core data reading. The core data is the more important of the two since it excludes more volatile food and energy prices.

April's Industrial Production is Friday's second relevant report. It measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.6% decline in production, indicating that manufacturing activity is slowing rapidly. A larger decline in output would be good news for the bond market and mortgage rates because it would indicate that the manufacturing sector is weaker than expected.

The last report of the week is May's preliminary reading to the University of Michigan's Index of Consumer Sentiment. This index measures consumer willingness to spend and usually has a moderate impact on the financial markets. It is expected to show a reading of 65.0, which would be little change from last month's final reading. If it shows a decline in consumer confidence, bond prices will likely rise, assuming the CPI does not give us a significant surprise.

Overall, it likely will be a pretty active week for mortgage rates. Besides the week's important economic news, look for the stock markets to be a major influence on trading. The most important day of the week is Friday with three reports on the agenda, including the CPI. But Wednesday is important due to the Retail Sales report. I am expecting to see several noticeable changes to rates this week, and would not be surprised to see multiple intra-day revisions also. Accordingly, please be attentive to the markets if still floating an interest rate.

Improved Economic Outlook

Increased optimism about the pace of an economic recovery helped the stock market and hurt bond markets this week. As a result, mortgage rates ended the week a little higher. Mortgage rates are being pressured by concerns that an economic rebound will bring increased inflation sooner than recently thought. In addition, large Treasury auctions are adding significant supply to the market, forcing yields higher. Fortunately, foreign investors remain active buyers and Fed purchases continue at a strong pace.

Comments from Fed Chief Bernanke and generally stronger than expected economic data fueled upward revisions to the consensus economic forecast this week. In Tuesday's testimony to Congress, Bernanke offered his most optimistic economic outlook since the recession began. He expects economy activity to "bottom out, then to turn up later this year". He warned that the labor market may recover very slowly, but he expects that the Unemployment Rate will peak below 10%. He pointed to the decline in mortgage rates as a successful outcome of Fed programs and suggested that there have been signs that the housing market may be near a bottom. Housing sector data released during the week supported his view. Pending Home Sales, a leading indicator for the housing market, rose 3%, and Construction Spending posted gains as well.

In a typical economic recovery, the labor market is one of the last areas to turn around, and the pattern is expected to hold this year. The April Employment report showed that the economy lost -539K jobs, which was a large number but fewer than expected. The Unemployment Rate rose to 8.9% from 8.5% in March. The consensus outlook is that a pickup in the job market will lag an improvement in the overall economy by several months.

Advertising in Real Estate

In real estate, advertising remains to proliferate with more ways that could increase productivity.

However, for those who still don't know how to maximize the potential of advertising in increasing their real estate sales, here are some ways to consider:

1. Web site listings
Real estate businesses may consider the benefits of advertising their products or services online. In this manner, they could even increase their market share by accessing those who cannot be reached by simple ways of promotions and advertising.
People behind the real estate business may choose from the different web site listings available in the Internet today.

2. Search engines registration
Real estate businessmen may also opt for the sear engines that are available in the Internet. With a reasonable amount, real estate businesses may promote their products online and may get more exposure through search engines. Two of the most common search engines are Google and Yahoo. So, if the business is listed at these sites, chances are they'll reap more profits than they could imagine.

3. Banner ads
Banner ads are those ads that appear on top of a certain sponsoring website. It contains the business' name and the hyperlink that connects the customer to the business' site.
In this way, real estate entrepreneurs may take the chance of increasing their exposure online by letting the people know that they exist.

4. Emails
Real estate businesses may also resort to this kind of advertising. Though, special considerations should be made when constructing emails so that it will not be categorized as spam.
Also, to maximize the use of this advertising technique, the real estate business must also have an email list of their potential buyers. I recommend Christian Stefferud at Master My Maketing. Christian teaches how to create email campaigns and build a referral based business with social networking.

5. The Basics
It still pays to be traditional. In fact, one of the best ways to advertise a product is to use the traditional method of advertising - the print and the broadcast advertisements. There are people who would rather see the ads on television or in newspapers than online.
But whatever type of advertising a real estate business use, one thing is bound to help them boost their sales and profit. It just needs the skill to decide which would go best with the business.

10 Tips on How to Know if Your Buyer is Working With the Right Lender

Your buyer says, "Let's make an offer on that property!"

You ask, "Have you been Pre-Qualified?"

Your buyer says, "Of course I have. My cousin's son, who just finished some courses at community college and landed a job at the local bank got me this pre-qualification certificate."

That should be a RED FLAG.

It's always been said, it's not the bank you go to, but the agent originating your file that's going to make a difference on how fast and smooth the loan gets done.

So what makes a good loan agent, mortgage consultant, or home loan originator?

1. Agent needs to answer the phone. A good agent will answer your phone call when you need them to. If they don't, leave a message and they should return your call that same day. If they don't call back, they're either swamped with leads or golfing.


2. Call potential leads immediately. A good agent understands 'Time is of the Essence'. They should call your buyer asap and get started on the pre-qualification procedure. After the pre-qualification is done, agent should fax and email a pre-qualification letter and CALL the realtor to make sure they received it. That letter is needed to submit the offer.


3. Have quick access to run credit. Personally I have my own account with my credit report agency. I ask for the borrower's permission to order the credit report and I order it at my expense. I do not need a manager's permission or tell my client I will need to go to the office to order it. I have the capability of ordering credit through my lap top or blackberry.


4. Take a complete 1003. A 1003 is a loan application. The more detailed information on the loan application, the quicker and smoother the process of the loan can be. This part is very important. There have been deals rejected because of lacking info or too much info. An experienced loan agent knows exactly what the underwriter is looking for, how to make the underwriter's job less stressful, and how to get an approval with minimum conditions.


5. Gathering necessary documentation. A good loan agent knows what is needed to get the deal done and it's not only pay stubs, W-2's, and bank statements. There is more to it, but each case has it's own individual needs.


6. Presenting a fair Good Faith Estimate. This is what makes a difference between the honest loan agent and the dishonest loan agent. It's very simple to make the buyer believe their fees are going to be low by saying escrow will be $100 and title will be $100, but what happens at closing when the buyer is presented with the actual fees? They get upset, uncomfortable, and the experience becomes negative. Personally I like to pad my GFE. My cost, interest rate, and monthly payments have mostly appeared less at time of signing docs. Therefore the buyer is signing freely and appears to be very satisfied with the transaction.


7. Returning call to Realtor with realistic numbers. After talking to buyer a loan agent should immediately call the Realtor and review ratios and price scenarios. The Realtor needs a good offer price to begin negotiations just in case the seller counters the offer and prices start to change. How high of a price can the buyer qualify for? Can they pay for their own closing cost just in case seller denies paying for closing cost?


8. Offer gets accepted and loan begins process. At this stage a good loan agent will have most of the process already started. Ordering appraisal, verifications, escrow, and title should be the only concerns left. A great support team is needing in the operations department. I have 3 processors pushing to get deals done FAST.


9. Updates. A great loan agent will have a system in place keeping track of all loans and updating Realtors on a weekly basis unless things happen faster, then it can be on a daily basis.


10. Offering their weekends at open houses. Helping a Realtor on the weekends can make a difference between opening escrow or multiple offers. Being at the open houses, well equipped and ready to approve a buyer can get a realtor one step closer to opening escrow.

Once a loan agent has proven to the Realtor that teaming up with him/her can make a positive outlook in their success, THE SKY IS THE LIMIT!

Your loan agent should be helping with your success.