GMAC Mortgage

GMAC announced Wednesday afternoon that it saw a net loss of $910 million in its mortgage business in the quarter, versus net income of $495 million a year earlier.

That’s a $1,405,000,000 swing. Ouch.

Gross Domestic Product

So what is the GDP? In simplistic terms, it’s a measure of how well the economy is growing. The revised numbers that came out this morning show that the first quarter 2007 GDP actually grew by .6% rather than the 1.3% originally reported. That’s a reduction by over 50%.

So what does this mean?
1. The economy is growing at it’s slowest rate since 2002. This means that inflation is less of a risk.
2. The stock market will probably go up today because the likelihood that the Fed will lower rates later this year just increased.
3. We might see a small improvement in mortgage rates today.

None of this seems to focus on the fact that a .6% growth in the economy is hardly boom times…..

Stay tuned, later today the Chicago Purchasing Manager’s Index comes out – another glimpse into the “speed” of the economy. And then tomorrow, it’s Jobs, Jobs and more Jobs (or maybe less jobs?) The May Jobs report comes out.

Kent County Foreclosures

Check out http://www.woodtv.com/Global/story.asp?S=6588963

Foreclosures are up, WAY up. Why? Two main things:
1. Tough economic times
2. Irresponsible lending where people got into mortgages that they didn’t understand and weren’t prepared for. I talked to someone the other day who is looking at the interest rate on their mortgage going from 6% to 13% in August of this year. Yikes!

If there are any Realtors in the Grand Rapids area who would like to consider being a “guest blogger” with ideas on how what someone who is trying to sell their home can do to compete against the foreclosures, e-mail me offlist at thomas.vanderwell@53.com and let’s talk about the possibility.

Have a good day!

A little irrational exuberance?

Okay, this morning I said, “I think we might be looking at a down day on the stock market and that would be good for mortgage rates.”

Well, what did the stock market do? It went up to another record close!

I don’t see the fundementals of today’s market supporting it, but I hope I’m wrong…..

This article has some not so nice things to say about Realtors and mortgage brokers

http://money.cnn.com/2007/05/29/real_estate/could_have_had_a_prime/index.htm

But it shows the importance of doing your homework, shopping around and making sure you work with someone you can trust.

The Chinese Stock Market?

Okay, here’s a prediction on how things might pan out today.

Step 1 – the Shanghai Stock index dropped 6.5% last night (that translates to a 878 point drop in the Dow!)

Step 2 – If the US markets get jumpy because of that, people could pull their money out of our stock market because they could see our stock market as being “risky” too.

Step 3 – Where would they put their money? The only place that would be considered safe and still get a decent return is the bond market.

Step 4 – The bond market gets a sudden influx of money. That drives the demand for bonds up.

Step 5 – As demand for bonds goes up, the rate on them goes down.

Step 6 – As rates on bonds go, so goes mortgage rates.

It’s called a “flight to quality.”

Now let’s see what happens today!

Tom

Grand Rapids Parade of Homes

I talked to one builder and they said they have had over 1500 people through their two parades in the first 3 days. That’s way ahead of “usual.” Plus they have already set up a couple of appointments to talk to people about building houses. That’s better than usual at this time of the parade as well.

The price range this particular builder usually works in is $400,000 and up, so that supports what I’ve said before. The real weakness in today’s market is between $180,000 and $400,000.

I’ll let you know what else I hear as I hear more on it.

It’s going to be an interesting week…..

It’s supposed to be a short week, but there are a number of economic reports that are coming out this week that are potential market moving reports. Let me layout what’s happening and what to watch for:
Today – Consumer Confidence – came out this morning better than expected mainly because of the rising values in everyone’s 401K plans.
Wednesday – the Fed’s minutes from their last meeting get released. What did they discuss before they did “nothing.” (Hardly gripping reading, but it might provide some insights.)
Thursday – a couple of reports on Gross Domestic Product, construction spending, and some manufacturing reports.
Friday – it’s all about jobs. Jobs created, unemployment rate, hourly earnings, average work week, etc.

The things to watch for are essentially two:
1. Do the numbers come in better than expectations, worse than expectations, or about the same? It’s kind of a “good news is bad news” scenario. If a number comes in better (175,000 new jobs rather than 140,000) that is good for the economy, but it reduces the likelihood that the Fed will lower rates. The likelihood that the Fed will either lower or raise rates has a strong impact on the direction of mortgage rates.
2. What do the reports say about inflation? The bond market (and therefore mortgage rates) don’t like inflation. So if inflation is seen as increasing, rates go up, if seen as decreasing, rates go down.

Stay tuned and I’ll keep you informed.

Tom

It’s going to be an interesting week…..

It’s supposed to be a short week, but there are a number of economic reports that are coming out this week that are potential market moving reports. Let me layout what’s happening and what to watch for:
Today – Consumer Confidence – came out this morning better than expected mainly because of the rising values in everyone’s 401K plans.
Wednesday – the Fed’s minutes from their last meeting get released. What did they discuss before they did “nothing.” (Hardly gripping reading, but it might provide some insights.)
Thursday – a couple of reports on Gross Domestic Product, construction spending, and some manufacturing reports.
Friday – it’s all about jobs. Jobs created, unemployment rate, hourly earnings, average work week, etc.

The things to watch for are essentially two:
1. Do the numbers come in better than expectations, worse than expectations, or about the same? It’s kind of a “good news is bad news” scenario. If a number comes in better (175,000 new jobs rather than 140,000) that is good for the economy, but it reduces the likelihood that the Fed will lower rates. The likelihood that the Fed will either lower or raise rates has a strong impact on the direction of mortgage rates.
2. What do the reports say about inflation? The bond market (and therefore mortgage rates) don’t like inflation. So if inflation is seen as increasing, rates go up, if seen as decreasing, rates go down.

Stay tuned and I’ll keep you informed.

Tom

It’s going to be an interesting week…..

It’s supposed to be a short week, but there are a number of economic reports that are coming out this week that are potential market moving reports. Let me layout what’s happening and what to watch for:
Today – Consumer Confidence – came out this morning better than expected mainly because of the rising values in everyone’s 401K plans.
Wednesday – the Fed’s minutes from their last meeting get released. What did they discuss before they did “nothing.” (Hardly gripping reading, but it might provide some insights.)
Thursday – a couple of reports on Gross Domestic Product, construction spending, and some manufacturing reports.
Friday – it’s all about jobs. Jobs created, unemployment rate, hourly earnings, average work week, etc.

The things to watch for are essentially two:
1. Do the numbers come in better than expectations, worse than expectations, or about the same? It’s kind of a “good news is bad news” scenario. If a number comes in better (175,000 new jobs rather than 140,000) that is good for the economy, but it reduces the likelihood that the Fed will lower rates. The likelihood that the Fed will either lower or raise rates has a strong impact on the direction of mortgage rates.
2. What do the reports say about inflation? The bond market (and therefore mortgage rates) don’t like inflation. So if inflation is seen as increasing, rates go up, if seen as decreasing, rates go down.

Stay tuned and I’ll keep you informed.

Tom

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