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Bill provides timely information with paying attention to detail. Extensive knowledge, familiar with market trend and responsible to the client.

Daisy Wang, Refinance Client, Sunnyvale
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Bill is a fantastic agent.I have a very good experience of purchasing my first home. Good personality with friendly and patient attitude.

Jackie Wen, Buyer, San Jose
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I am amazed by his work ethic and care. If you give yourself a chance to cooperate with him, you will put your 100% trust on him because of his professional service.

Alisa Wang, Seller, Union City
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Bill is very knowledgeable about the current market. Actually my husband and I just moved from another state. After talking with Bill, the problem has been addressed very well.

Andrew Zhang, Relocation buyer, Mountain View
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Bill was my real estate agent and he helped me found and purchased the house in 2010 in San Jose. He is not only knowledgeable in this area also very patient. I recommend him!!!

Alex Yao, Buyer, San Jose
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Bill provided very competitive Mortgage rates and excellent customer service. He personally assisted me through every step of the loan process and helped me solve all the met trouble.

Keila Song, Refinance client, Milpitas
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When we purchased our house, the rate at that time was 3.875%. He took care of all the issue. 3 weeks later, we got our new rate approved, which is 2.625%! We DID NOT PAY ANY PENNY! REALLY NO POINT, NO FEE!

Sophia Wang, Purchasing finance, San Jose
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Choosing Bill as my agent, you can SAVE time and SAVE money! I am very pleased with his service!

Nick Huang, Seller, Milpitas
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As a first-time buyer, we are fortunate to choose Bill. He and his team do provide us with comprehensive and professional services. In the process of cooperation, some of the suggestions he gave us are currently correct and practical.

David Kang, Buyer, Fremont
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We choose Bill as our listing agent. The staging he and his team did is modern, tasteful and look much better. Finally we sold our house for above asking price and within a week of listing!

Arianna Huang, Seller, Cupertino
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At first, I didn’t know anything about real estate investment. I consulted Bill ’s investment team. I think his real estate investment analysis is done well and has a certain depth.

Allan Liu, Investor, Fremont
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Bill took care of my refinancing and did a great job. I collaborated with him on a few community events, when I got to know him as hard-working, trustworthy, detail oriented and a great communicator.

Qinggang Zhou, Refinance client, Belmont

Economic News for the Week Ending 9-20-13

SUMMARY


Economic reports this week were mostly positive. Industrial production and capacity utilization inched up. Single family housing starts and existing home sales rose substantially. The four-week moving average for both initial claims for unemployment and continuing claims continued to decline even though experts say there are flaws in the data that overstate the decline. All this was swamped by Fed Chairman Bernanke's assertion that the economy is not growing fast enough and therefore the Fed will not taper its quantitative easing policy as promised in September because GDP is growing too slowly. New job creation must be raised substantially to 200,000 or 250,000/month from 150,000 to reduce the 7.3% rate of unemployment more quickly. The current rate of PCE inflation of 1.2% is not a problem. This announcement caused interest rates to plummet and the stock market to soar to new heights. A battle between the president and Republicans continues over raising the debt ceiling. More than half the U.S. population continues to dislike Obama Care. Can Congressional Republicans get the president to cut back on some of his favorite government programs (especially Obama Care) in exchange for raising the debt ceiling? It isn't clear how this kerfuffle will resolve but it is likely that GDP will grow only around 1.5% to 2% for the year and not much faster next year.  For the week there were 14 positive trends offset by only 5 negative trends. The DJIA rose from 15,376 to 15,451.

MORTGAGE MARKET
The pace of both existing home sales and new construction has begun to return to historically normal levels. The threat of interest rates rising due to a tapering of the Federal Reserve's quantitative easing helped spur housing sales in August. According to the National Association of Realtors, total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 1.7% to a seasonally adjusted annual rate of 5.48 million in August from 5.39 million in July, and are 13.2% higher than the 4.84 million-unit level in August 2012. Sales are at the highest pace since February 2007, when they hit 5.79 million, and have remained above year-ago levels for the past 26 months. Housing production increased 0.9% to a seasonally adjusted rate of 891,000. While the housing market clearly appears to have stabilized, the degree of future growth is far from certain. On the positive side, single-family permits posted a 3% gain to 627,000 units - the best pace since May of 2008, indicating that builders are optimistic about future new home demand. There have been four consecutive months of improvement. Builder confidence in the market for newly built, single-family homes held unchanged in September with a reading of 58 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). "While builder confidence is holding at the highest level in nearly eight years, many are reporting some hesitancy on the part of buyers due to the sharp increase in interest rates," said NAHB Chairman Rick Judson. On the negative side, underwriting guidelines may tighten with the implementation of the Dodd-Frank qualified mortgage rules in January and with the Fannie Mae and Freddie Mac's intensified focus on loan quality. While the expectations of lenders have not changed, the percent of audits will increase. "As rates go up, the credit box will try to be expanded, corners will be cut and that's when we will be on the front lines," Chris Mock, Freddie's vice president of quality control.

Rates were lower this week and are likely to stay lower for a while longer due to the Federal Reserve's announcement that they will extend quantitative easing. Last week, according to the MBA's Market Composite Index, there was an 11.2% increase in seasonally adjusted mortgage loan application from one week earlier. Most of the increase was due to an increase in refinances which were up 18% from the prior week, constituting 61% of total applications. Their purchase index increased 3%. According to Freddie Mac's Primary Mortgage Market Survey® , the 30-year fixed-rate mortgage averaged 4.50% with an average 0.7 point for the week ending September 19, 2013, down from last week when it averaged 4.57%. A year ago at this time, the 30-year fixed-rate mortgage averaged 3.49%.

POSITIVE TRENDS

  • Industrial production growth was moderately strong in August. It increased 0.4%, after no change in July. The increase was due to continued strong demand for automobiles. The output of durable goods was up 1.2% in August after having declined 0.6% in July.
  •  Capacity utilization for total industry improved somewhat in August to 77.8% from 77.6% in July. The median market forecast was for 77.9%.
  • Initial claims for unemployment fell to 309,000 in the week ending September 14, up from 294,000 the prior week but lower than expected. The four-week moving average fell to 315,000 from 322,000 a week earlier. Continuing claims for unemployment declined to 2,787,000 from 2,815,000. The four-week moving average for this measure fell to 2,855,000 from 2,939,000 the week prior. The declines in both series were caused mainly by computer glitches in the processing of claims. Claims are expected to rise in the future to a more normal level once this backlog of rejected claims is fixed. GDP growth is still slower than expected and Fed Chairman Bernanke has revised down his expectations for both GDP growth and employment.
  • Single family housing starts rose 7% to a 628,000 unit pace in August according to data released this week by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. Nationwide housing production rose 0.9% to a seasonally adjusted annual rate of 891,000. Multi-unit production declined but is much more volatile month to month. The single-family starts were lower than expected but were the most started since last February.
  • Inflation was under control in August according to the most recent consumer price index. It increased only 0.1%, compared to July's 0.2% and June's 0.5%. The CPI was up 1.5% from a year earlier. This rate of increase has been declining for the past two years and is not considered a problem by the Fed.
  • The index of leading economic indicators improved much more than expected, 0.7% in August following a revised gain of 0.5% in July.
  • August was the best month for sales of previously-owned homes since February 2007 according to figures released this week by the National Association of Realtors. Existing-home sales rose 1.7% in August from a month earlier to a seasonally adjusted annual rate of 5.48 million. The rate was 13.2% higher than the same period last year.
  • Existing home sales in August rose to a 5.48 million annual rate, up from 5.39 million in July. This was higher than expected and was 13.2% higher than a year ago. This was the highest level since February 2007. Inventories slipped to a 4.9 month level down from 5.0 months in July. The average price rose 14.7% from a year ago to $212,100. Earlier this month the rate for the ten year Treasury peaked at 3% but is now down to 2.75% with the surprise announcement by Bernanke that the Fed would not be tapering its QE3 purchases of Treasuries and mortgage-backed securities from $85 billion/month soon. The economy is not growing fast enough to move away from that policy. Sales rose because home buyers wanted to lock in their mortgage rate before it rose further with the expected end to QE3 in September. According to the Freddie Mac survey of mortgage lenders, the average rate for the 30 YFRM was 4.5% in mid-September and was expected to soon jump to 5% but now is expected to not change soon.
  • The Philadelphia Index of Manufacturing rose to 22.3 in September, up from 9.3 in August. This means improvement in manufacturing in that part of the country.
  • Larry Summers pulled out of the race to become the next Fed Chairman in January 2014 when Ben Bernanke's term ends. Janet Yellen is now expected to replace him. Her policy views are close to Bernanke's but more concerned about raising inflation to 2% and keeping QE3 in place until that is achieved.
  • Interest rates sunk after the Fed announcement of no tapering. The yield on the ten year Treasury fell to 2.75%, down from the peak of 3.00% it had reached on September 6. This sharp decline should expand mortgage originations more than expected last week when most economists were expecting a tapering of the QE3 policy.
  • Leading Indicators published by the Conference Board rose 0.7% in August, up from a 0.5% increase in July. This was a bit higher than expected and indicates a solid expansionary trend.
  • PennyMac Mortgage Investment Trust, is planning its first sale of jumbo home-loan securities. The deal is tied to $550.5 million of prime jumbo loans, representing a pool with "substantial borrower equity in each mortgaged property," said Kroll Bond Rating Agency.
  • Consumers are reverting to the payment patterns they held before the Great Recession, according to one of the nation's three nationwide credit reporting bureaus. A new report from TransUnion detailed how consumers have begun to once again pay their mortgages first each month and their auto loans and credit card loans later.

NEGATIVE TRENDS

  • Improvement in the Empire State manufacturing index was essentially flat this week and growth in new orders were soft indicating the future activity is likely to be weak.
  • This week the U.S. Census Bureau announced that in 2012, real median household income and the poverty rate were not statistically different from the previous year. Median household income in the United States in 2012 was $51,017, not statistically different in real terms from the 2011 median of $51,100. This followed two consecutive annual declines. For the past two years there has been no change in the poverty rate in the United States. According to the Census, the nation's official poverty rate in 2012 was 15.0 percent, which represents 46.5 million people living at or below the poverty line. The 2012 poverty rate was 2.5 percentage points higher than in 2007, the year before the economic downturn.
  • Wells Fargo, the largest home mortgage lender in the U.S. confirmed plans to lay off an additional 1,800 mortgage production staff, bringing mortgage layoffs announced in third quarter to 4,800. The company's CFO said mortgage originations are down 30% this quarter.
  • Although Angela Merkel has 70% popularity in Germany before her expected re-election on September 22, the German Institute for Economic Research has criticized her for failing to increase investment in areas like transport and education which will reduce Germany's potential annual growth in 2017 to 1% from 1.6%.
  • J.P. Morgan agreed to pay more than $920 million to settle with the SEC, the Office of the Comptroller of the Currency, the Federal Reserve and the U.K.'s Financial Conduct Authority over the London Whale trading blunder that cost the bank more than $6 billion. According to the Wall Street Journal, the agency refused to negotiate the amount of the fine- an unusually tough stance by the SEC. This is just the latest punitive fine of banks in the U.S. which is helping to keep lending standards very tight.

CONCLUSION
The stock and bond markets were stunned and pleased with Bernanke's announcement that QE3 will continue unchanged over the near term. But a battle between the president and Congressional Republicans continues over raising the debt ceiling. The bottom line for all these interactions is continued mediocre growth for the economy of around 1.5% to 2%.

Access Mortgage Research was founded in 1991 to provide research to the mortgage industry. For more details see www.accessmrc.com or phone 410-772-1161

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