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goldminingXpert (29.46)

Reuters: Mortgage Volume Down 75%

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June 05, 2009 – Comments (25)

As the bond market crashes again this morning, it is worth noting that already, the sharp rise in interest rates that I have been documenting is taking its toll. Here is a Reuters argument that blows one of the pillars of the green shoot theory out of the water:

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EXCLUSIVE-Higher rates taking toll on home loan demand: GMAC

NEW YORK (Reuters) - Higher interest rates are exacting a severe toll on home loan demand and U.S. housing prices are not near a bottom, according to the chief executive of one of the country's largest lenders.

Tom Marano, chief executive of mortgage operations at GMAC, in an exclusive interview with Reuters on Tuesday, said home loan volume at GMAC is about 75 percent lower now than when mortgage rates hit record lows several months ago.

"Up until the past week and a half, the Federal Reserve had been successful at bringing interest rates on mortgages down," he said.

The U.S. housing market is in the midst of its worst downturn since the Great Depression, with home prices falling since hitting a peak in the second quarter of 2006.

There have been some signs that the housing market is stabilizing. The National Association of Realtors on Tuesday reported that pending home sales, based on new sales contracts, spiked 6.7 percent in April, the biggest jump since October 2001.

When mortgage rates hit a low, about two months ago, GMAC -- the auto and mortgage lender that has received billions in government bailout money -- registered about $750 million to $1 billion mortgage rate-locks a day. The interest rate on 30-year fixed-rate mortgages was around 4.60 percent during this time, Marano said.

On May 21, when mortgage rates were around 4.80 percent, volume had dropped to about $500 million a day. By Monday, mortgage rates were at 5.15 percent, and originations dwindled to $215 million, he said.

"The Federal Reserve probably needs to pick up the pace of its purchases at this point," he said, of what is needed to keep rates low.

"If mortgage rates do not go back down, home prices will need to go lower to lure buyers," he said.

The Federal Reserve is in the midst of purchasing $300 billion in Treasuries and $1.25 trillion in mortgage-backed securities in order to unclog credit markets and to keep interest rates lower.

Thirty-year mortgage rates had mostly been on a downward trend since the Fed unveiled its plan to buy mortgage-backed debt in late November. But the Fed has met resistance in the bond market.

Treasury yields, which are linked to mortgage rates, have risen sharply in recent weeks, and mortgage rates have responded in kind.


http://www.reuters.com/article/newsOne/i....

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Not only are mortgage rates not going back down, they are in fact going SCREAMING higher today as bid in the 10-year treasuary has disappeared entirely. Hope you're enjoying you 100 point Dow rally and don't mind sacrificing the hopes of interest rates staying at reasonable levels in return. I can just see the history books now--the US Govenment went bankrupt as interest rates went to 10% because Obama/Bernanke wanted the Dow to keep rising. Idiots.

25 Comments – Post Your Own

#1) On June 05, 2009 at 9:45 AM, goldminingXpert (29.46) wrote:

Don't trade on this, but my signals are saying the high you saw this morning is it. I'm initating a small short position now but use your own judgment.

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#2) On June 05, 2009 at 9:47 AM, outoffocus (22.85) wrote:

Pay no attention to the men behind the curtain.

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#3) On June 05, 2009 at 9:48 AM, goldminingXpert (29.46) wrote:

BOOM BABY! The moment they try to put even a tiny bid under the 10--year treasury, the S&P dumps 5 points instantly. I'm getting aggressively short here... damn the torpedos, full speed ahead. With more bond auctions coming up on Tuesday, the S&P doesn't stand a chance unless the government decides to let the bond market crater without a fight.

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#4) On June 05, 2009 at 10:14 AM, goldminingXpert (29.46) wrote:

I've got signals pointing to an <920 S&P close for today. Does it happen, probably not. But we have a set-up for an all out waterfall today. It is beautiful.

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#5) On June 05, 2009 at 10:23 AM, dividendhound (< 20) wrote:

Can't GMXFuzzykittens come on here and post a response? Or was he run over by GMXbatteringram?

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#6) On June 05, 2009 at 10:24 AM, DeerHunter73 (73.01) wrote:

Gmx yer talkin about 2.5% decline today if that were to happen. Nothing in the market today to create that selling panic.

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#7) On June 05, 2009 at 10:27 AM, gmxFuzzyKittens (23.27) wrote:

GMXFuzzyKittens is optimistic for the market today because there are a lot of people like Deerhunter who just don't understand that a collapse in bond prices and skyrocketing mortgage rates (we're already up another 1/8th if you want a 30 year fixed today) is bad. We shall continue to rally on ignorance, as we've been doing for the past month. Now pass me some milk.

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#8) On June 05, 2009 at 10:36 AM, goldminingXpert (29.46) wrote:

Signals are pointing to <914 for S&P at the end of the day now. That's a cool 31 points from 945 where I got in. TLT/10 year getting trashed again and the S&P isn't even attempting to bounce. Pitiful.

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#9) On June 05, 2009 at 10:40 AM, goldminingXpert (29.46) wrote:

Ben keeping mortgage rates low FAIL:

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#10) On June 05, 2009 at 10:43 AM, DeerHunter73 (73.01) wrote:

S&P is now posiive at 10:41 up 1.20 .13%

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#11) On June 05, 2009 at 10:46 AM, alstry (35.36) wrote:

ASK YOUSELF THIS QUESTION....WHAT PERCENTAGE OF AMERICANS NOW ARE ON WELFARE, UNEMPLOYED, WORKING PART TIME, OR WORKING AT A LOW PAYING SERVICE JOB LIKE WAL MART CASHIER OR SIMILAR....???

THEN ASK YOURSELF WHAT KIND OF MORTGAGE CAN THESE PEOPLE AFFORD NOW THAT WE ARE DOING INCOME VERIFICATION!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

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#12) On June 05, 2009 at 10:48 AM, LongTermBull (92.72) wrote:

TLT/10 year getting trashed again and the S&P isn't even attempting to bounce. Pitiful.

Oops

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#13) On June 05, 2009 at 10:49 AM, goldminingXpert (29.46) wrote:

and the 10 year yield is at 3.84% (was 3.71 yesterday.) The last time buyers came in and tried to move the 10 year yield down, they got it to drop .04 and it cost the S&P 12 points. Ben would have to tank the equity market to reel the 10 year train back in and he will do so.

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#14) On June 05, 2009 at 10:52 AM, goldminingXpert (29.46) wrote:

The bounce in the S&P was less than a 50% retrace from bottom to top (top being 957 which we hit pre-market) to the low of 934, but the TNX traded to a new high to get that pitiful bounce.

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#15) On June 05, 2009 at 10:54 AM, DeerHunter73 (73.01) wrote:

I believe i made a comment on one of your post that the S&P could drop back to 900. if that was the case it would then reverse and goto 1000. I'm not saying there wont be a sell off of say 45 points in it, however i will keep my longs on the 1000 pop and end of year closing above 1000 now.

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#16) On June 05, 2009 at 10:58 AM, DeerHunter73 (73.01) wrote:

i agree yes premarket showed a top of 957 but that was PREMARKET. at the end of the day all the charts used are used from 9:30 to 4:00 pm and unless we hit 957 during the day, that number wont ever be mentioned.

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#17) On June 05, 2009 at 11:06 AM, russiangambit (29.27) wrote:

Yep. 30 yr rate is 0.15% up today.

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#18) On June 05, 2009 at 11:07 AM, goldminingXpert (29.46) wrote:

I've got the S&P on my 2nd small screen--it's not the main event today. Watch the 10-year. It is all that matters right now. Gold and US Dollar are also far more important than S&P as we must see which door Bernanke will choose.

10-year bond futures over the past two days:

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#19) On June 05, 2009 at 11:42 AM, goldminingXpert (29.46) wrote:

Responding to my original topic of blog post: Wells Fargo just repriced to 5.625% for a 30year Fixed. It was 5.375% at the close of business last night. Green Shoots!

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#20) On June 05, 2009 at 11:58 AM, goldminingXpert (29.46) wrote:

Short, simple and sweet: http://zerohedge.blogspot.com/2009/06/mortgage-refi-trade-is-over.html

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#21) On June 05, 2009 at 12:42 PM, cbwang888 (25.86) wrote:

I will start buying puts agressively when "good news" can no longer move the market higher. Now I will just buy June calls on commodity stocks and some July puts on financials like COF 25 July puts.

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#22) On June 05, 2009 at 4:01 PM, DeerHunter73 (73.01) wrote:

I've got signals pointing to an <920 S&P close for today. Does it happen, probably not. But we have a set-up for an all out waterfall today. It is beautiful..

Signals are pointing to <914 for S&P at the end of the day now. That's a cool 31 points from 945 where I got in. TLT/10 year getting trashed again and the S&P isn't even attempting to bounce. Pitiful.

So much for the sell off today.....

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#23) On June 05, 2009 at 4:11 PM, FleaBagger (29.77) wrote:

Ben doesn't consciously think it's his job to fund the government. He really thinks he's trying to walk a highwire between inflation and economic contraction. He's sincere, but he's mentally enslaved to those who trained him (GS, JPM, etc.); nevertheless, they don't directly control him. Their control over Obama and Geithner is much more direct and sure.

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#24) On June 05, 2009 at 4:59 PM, LongTermBull (92.72) wrote:

...But we have a set-up for an all out waterfall today. It is beautiful.

Oops

Signals are pointing to <914 for S&P at the end of the day now. That's a cool 31 points from 945 where I got in.

Oops

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#25) On June 05, 2009 at 5:27 PM, EnigmaDude (94.14) wrote:

Perhaps you meant to say <941 for the S&P today...

And the reason that mortgages are down has nothing to do with interest rates.  It's because the banks are NOT making loans!  Not even to highly qualified buyers.  Here is a perfect example.

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