Market Comment
Mortgage bond prices fell last week pushing mortgage interest rates considerably higher. Inflation fears dominated trading. Philadelphia Fed President Plosser warned, “The economy may be at greater risk of inflation than conventional wisdom indicates.” A weaker US dollar, escalating oil prices, and concerns about the US debt rating also pressured mortgage bonds lower and mortgage interest rates higher.

Trading remained volatile throughout the week but most of the worsening occurred Thursday and Friday. For the week, interest rates rose by about 1/2 of a discount point.

The gross domestic product data Friday will be the most important release this week. The additional debt supply associated with the Treasury auctions will also play a critical role in any mortgage interest rate fluctuation this week.

US Credit Rating
There are global concerns that the US will lose its AAA credit rating. Standard and Poor’s recently downgraded the UK from stable to negative. Many analysts expect the UK to lose its AAA credit rating. Market participants are concerned the US will follow as deficit spending continues. Bond guru Bill Gross said it would happen in “at least three to four years, if that, but the market will recognize the problems before the rating services – just like it did today.”

Just as in the case of a consumer, a lower credit rating would mean that the government would pay higher rates to borrow money. Logically, an investor requires more return for the additional risk of possibly not being paid on their investment. This could result in interest rates rising on not only Treasuries, but also mortgages. As warned last week, it is a great time to take advantage of rates at the current levels to avoid the uncertainty of where mortgage interest rates will be in the future.

Say goodbye to winter with food, drinks and laughter!

1st Mondays is a new monthly co-branded networking event sponsored by PERL Mortgage and hosted at Jameson Real Estate. The next event is this Monday, May 4th from 5-7 at Jameson (425 West North Avenue). This “Cuatro de Mayo” celebration of sorts features salsa, chips, guac, quesadillas and margaritas — and an evening of improv starring Chicago’s best comedy veterans. The event is free, and we hope to see you there!

In times like these, people tend to curb spending. But now is truly the time to go against the grain and capture the home purchase of a lifetime. We’re experiencing the perfect mix of low home prices along with historically low rates to make home buying a positive financial move. Here are a few other bonuses to buying in the current market:

Affordability
Prices have fallen in the last two years.  Economists expect this to level out by the end of the year, making this buying season the perfect time to capitalize on a home sale.

Inventory
With so many homes on the market, it’s easier to find the one that most closely matches your wish list. A larger selection of homes will also keep prices low for the time being.

Discounts
Builders are getting aggressive with their pricing in order to move units more quickly, putting a “new construction” home within reach — now more than ever.

In today’s market, the first step is pre-approval. This will ensure that you can afford your dream home. Please call me to help you devise the best plan for your upcoming purchase. And if you need to sell your home prior to buying something new, please let me know.

Click Here to download a printable version of the Spring 2009 Newsletter.

A short sale is a sale of real property for an amount less than the unpaid balance of its first mortgage. Once costs such as real estate commissions, escrow, and title are passed along to the lender (who agrees to accept the proceeds as payment in full, despite the shortfall), the sale progresses.

Such a sale requires the consent of the lender and may create taxable gain for the seller — to the extent of the debt forgiven by the lender. Short sales have become a popular alternative to foreclosure, and are a more credit-friendly option.

Sellers who are considering a short sale should negotiate a payoff with their lender first before listing the property. This will help to determine the sales price. In addition, this will streamline the process, as it will make it faster and easier to close once a buyer has been found.

For buyers, short sales can involve a little more paperwork but overall, they are a great way to obtain a good price on a property.

When considering a short sale, make sure to involve a mortgage advisor, realtor, and attorney early in the process. They will  provide guidance lead buyers through the appropriate steps to make the transaction as simple as possible.

Click Here to download a printable pdf of our Spring 2009 Newsletter.

Market Comment
Mortgage bond prices rose last week helping mortgage interest rates improve. Trading was thin ahead of the extended holiday weekend. The trade deficit came in at $25.97 billion, its lowest level since 1999. Weekly jobless claims were better than expected.

For the week, interest rates on government and conventional loans fell by about 1/8 of a discount point.

The consumer price index (CPI) Wednesday will be the most important data release this week. Retail sales and producer price index (PPI) data will also be important.

Producer Price Index
The producer price index (PPI) is a measure of prices at the producer level and is the first inflation report released each month. If producer prices go up, producers have a tendency to pass these increases on to consumers in the form of higher priced goods.

It is important to note that the PPI is only a measure of goods, while the consumer price index (CPI) is a measure of goods and services. Feasibly, the price of goods could remain stable, while the price of services increases. The distinction between the two reports shows why most analysts view the CPI as a more accurate indicator of inflation. Nevertheless, market participants still gain valuable insight into potential fluctuation in financial markets from the PPI release.