Today's Interest Rates: 30 Year fixed 4.125% (4.291% APR) 15 Year Fixed 3.250% (3.560% APR) 5 Year ARM 2.375% (2.541% APR) 30 Year Jumbo 4.250% (4.375% APR)

Interest rates continue to plunge, once again nearing record lows on average nationally. As a result, last week mortgage applications rose 7.8% for refinance, and 5.2% for purchase. Unfortunately, analysts do not see the increased activity as a harbinger for housing market recovery. 1) These numbers are still historically weak. 2) The issue is not the price of credit, rather high unemployment, tight credit, and distressed mortgage holders coupled with a weakening economy keep the housing market struggling.

One day good news, one day bad news... such is the economic reality of our shakey recovery.  After yesterday's report of a solid 15% jump in housing starts in June, we have bad news on a different housing front. Existing homes sales fell 0.8% in June, well below the expected 2.9% increase as forecast by a Reuters poll of economists. The rate is a seven month low, and is particularly frustrating after May's strong "pending sales" index mark. Contract cancellations spiked up to 16%, well above May's 4% rate, which helps explain the slow down.

Mortgage rates today remain the same: 30 year fixed 4.250% (4.416% APR), 15 Year Fixed 3.250% (3.560% APR), 5 Year ARM 2.375% (2.541% APR), 30 Year Jumbo 4.250% (4.375% APR).

After yesterday’s positivity, collapse. The better than expected weekly unemployment numbers caused optimist about today’s government June jobs report.  However, any hopes of strong gains were dashed, bringing about musings of a “double dip” in the recession.

The government reported that in June just 18,000 jobs were added, which increased the unemployment rate from 9.1% to 9.2%.  Stocks tumbled, with the Dow currently down 90.52 to 12,628.97. Although some analysts have counseled optimism (expected that such paltry growth figures would result in an even bigger sell off), there is widespread frustration with the numbers due to the expectations that the economy had made a firm steps toward improvement. Descriptors floating about the media includes: “shocking”, “stunning”, “horrific”, and “paltry.” 

As for larger implications to the economy, the question is – does job creation correlate with GDP growth?  Loosely, this is the case.  Job growth suggests that the economy is healthy and expanding.  Weak job growth, then, could be correlated with low spending and low production, and thus a low GDP (Gross Domestic Product – the market value of goods and services produced by a country, which is used to measure strength of economy).  On the other hand, the recovery is also influenced by low interest rates, a stronger Japan and lower gas prices. Unemployment is not the only factor to use in judging recovery, although as we have seen today in the market decline, it is viewed as central to the picture.

For our purposes at Central Coast Lending, such selloffs keep interest rates low. As investors flee the market, they invest in bonds, which have an inverse relation to interest rates (bond prices go up, interest rates go down).

For more on the report, see the following links:

CNBC

BLOOMBERG

  Here are Central Coast Lending's mortgage rates: 30 Year Fixed 4.250% (4.416 APR) 15 Year Fixed 3.375% (3.685% APR) 5 Year ARM 2.375% (2.541% APR) 30 Year Jumbo 4.250% (4.374% APR).

Central Coast Lending's mortgage rates are largely unchanged, with the only blip I slight increase in the 15-year fixed.

We have solid economic news today, with weekly jobless claims down 11,000 to beat the forecast of 3,000. The private sector added 157,000 jobs from May to June, significantly ahead of estimates. Chain retail stores reported higher than expected earnings in June.

As of this post, the Dow is up over 100 points to turn in another strong performance. With the exception of the beginning of the week, the market has seen solid gains for a two week period. Tomorrow, look for another jobs report.

Central Coast Lending's mortgage rates remain largely the same, with the exception of a slight drop in the 30 Year jumbo:

30 Year Fixed 4.250% (4.416% APR), 15 Year Fixed 3.375% (3.685% APR), 5 Year ARM 2.375% (2.541% APR), 30 Year Jumbo 4.250% (4.374% APR).

Stocks have continued to gain today, after yesterday's lull and last week's big rally. Currently, the Dow is up 0.35%, but with two and a half hours of trading left to go. Of note, the dollar index (a measure of the dollar's value against world currencies) has risen due to two key factors: 1) China has again increased interest rates to curb inflation on the back of steep grwoth. 2) Moody's downgraded Portugal's long term bond status to junk level, which brought about debt concern (which effected the Euro). 

We have employment numbers coming out the next few days, so stay tuned for what should be an eventful few days.

The national average of fixed mortgage rates stayed relatively unchanged last month according to Freddie Mac.  The national average of the 30-year fixed rose just slightly to 4.51 percent and the 15-year fixed remained at 3.69 percent (compare to Central Coast Lending's Rates: 4.250 percent for the 30-year and 3.375 for the 15-year).  We have hovered at near yearly lows, but this could come to an end now that QE2 is coming to an end.

QE2 is the Federal Reserve's "quantitative easing" program, in which the Fed purchased $600 billion in long-term US Treasury bonds to bring down long-term interest rates. The program injected cash into the economy to increase the money supply. The banks could then turn around and loan the extra money out, thus "easing" tight standards and lowering interest rates.(For a brief on QE2, see: link)

Now, with the program nearing an end, we could see interest rates increase over the summer with less of a money supply.  On the other hand, it is unclear just how much banks used the extra money to fund loans as banks have also been sitting on large cash reserves. The housing market continues to struggle and with demand remaining low, we may continue to see similar rates (and flush with money supply from the program, banks afford this). Another viewpoint is that with the government out of the way, we will see an increased amount of instability in the market that could attract investors to the Treasury bonds. This "flight to safety" principle, suggests that the US debt is actually one of the safest investments. As a result, interest rates could actually decline, as demand for Treasury bond could increase.

Stay tuned for more.

For now, Central Coast Lending's rates remain low: 30 Year Fixed 4.250% (4.416 APR) 15 Year Fixed 3.375% (3.685% APR) 5 Year ARM 2.375% (2.541% APR) 30 Year Jumbo 4.375% (4.499% APR).

Bank of America will set aside $14 billion to pay investors that bought toxic securities it assembled, including $8.5 billion to settle with some of the biggest holders. Most of the securities were underwritten by subprime lender Countrywide Financial – a company bought by Bank of America in 2008.

Link.

The National Association of Realtors’ “Pending Homes Sales Index” recovered in May, bouncing 8.2 percent to 88.8 percent. The shift countered April’s seven-month low. Economists say that the uptick is just a correction after the 11.3 percent decline in April. On a more negative side, the Mortgage Bankers Association reported a decline of 3 percent in applications for loans to buy homes.

Link.

The market continues its three-day rally with optimism over the Greek austerity measures an important reason for the optimism. 

Central Coast Lending's Rates fo Wednesday, June 29: 30 Year Fixed 4.250% (4.416 APR) 15 Year Fixed 3.375% (3.685% APR) 5 Year ARM 2.375% (2.541% APR) 30 Year Jumbo 4.250% (4.374% APR).

And CA has a budget! Gov. Brown and Dems. reached a deal that will close the $9.6 bill. deficit. It relies on $4 bill. of higher than projected revenues and spending cuts to schools, universities and courts, as well as increased fees and deferred payments. The deal isn't bipartisan.

Link.

Central Coast Lending Rates for Tuesday, June 28: 30 Year Fixed 4.125% (4.291 APR) 15 Year Fixed 3.375% (3.685 APR) 5 Year ARM 2.375% (2.541 APR) 30 Year Jumbo 4.250% (4.374 APR).

Morro Bay locals: leep your eyes open for the Morro Bay 4th schedule of events around town. The two-day event will include a skateboard race on the embarcadero on Sunday, ending with local band Red Skunk Gipsy Swing at Tidelands Park.  On Monday, we have the festivities at Tidelands which include the usual barbeque as well as four bands and other entertainment. Fireworks start at 9:30 p.m. 

Central Coast Lending will check back in with more on Morro Bay 4th before the weekend begins.

June 27: 30 Year Fixed 4.125% (4.291 APR) 15 Year Fixed 3.250% (3.560 APR) 5 Year ARM 2.375% (2.541 APR) 30 Year Jumbo 4.250% (4.374 APR). Consumer spending was flat May, marking the first time in ten months it did not increase. The static rate likely reflects a decline in auto sales (partially attributed to the disruption in Japan), a build up of inflationary pressures, and the difficulties of high gas prices.

Here is the link to the CNBC article.

In other news, Central Coast Lending is producing a commercial that will appear soon on KSBY6.  Keep your eyes open.  A quick plug - With expert loan officers stationed in four locations around the county (San Luis Obispo, Morro Bay, Paso Robles, and Arroyo Grande), we want to be Your Mortgage Expert.  We know the personal attention and thorough advice are important to you... and in the Central Coast, "local matters."  We don't want to talk at you about your mortgage, we want to talk with you, so that you understand the process and take control of your largest asset.  Come see us for a free loan prequalification discussion at any of our office locations:

Morro Bay - 601 Morro Bay Blvd., Suite B

Paso Robles - 1912 Spring Street.

San Luis Obispo - 1319 Marsh Street, Suite 101

Arroyo Grande - 318 East Branch Street

June 24: 30 Year Fixed 4.125% (4.291 APR) 15 Year Fixed 3.250% (3.560 APR) 5 Year ARM 2.375% (2.541 APR) 30 Year Jumbo 4.250% (4.374 APR). The US economy grew 1.9% in the first quarter, up from the estimated 1.8% a month ago. The revision reflects a lower trade deficit and a bigger increase in inventories than expected. The low growth can be attributed to a number of factors. See link for more.