News You Can Use from Gary Moore

Mortgage interest rates jumped on Wednesday and remain in the uptrend we have been warning about since our Nov. 13 Weekend Market Update. The 10-year Treasury, which often correlates with mortgage pricing, rose above 3% in yield for the first time since July 28, when mortgage rates began a fresh leg down to all-time lows that were reached in August and revisited a couple of times before November.

Meanwhile, stocks closed out their best week in a month despite weaker than expected November jobs data from the labor department on Friday. On Wednesday, stocks had boomed on optimism about European Union debt issues and after China reported renewed industrial growth.

While economic news and outlooks were generally positive for the week---which supports stocks and hits Treasuries and mortgage-backed securities (MBS)---the expectation of strong November jobs numbers on Friday was not borne out by government data. Although stocks were not so strong on Friday as earlier in the week, closing up for the day but modestly, that stocks did not sell off on perceived bad news is a strong signal that the stock market wants to go up and will defy fundamentals to do so.

The S&P 500 index closed the week up 3% at a two-year high (1,225), and the Nasdaq closed up 2.2% at 2,191 for its highest mark since January, 2008. For the week, the Dow Jones industrial average was up 2.6 percent, closing at 11,382.

The market's breadth was overwhelmingly positive on both the New York Stock Exchange and the Nasdaq, where about eight stocks rose for every five that fell. The three-day moving average of stocks hitting new 52-week highs on the New York Stock Exchange accelerated at the end of November and is now close to 250, while stocks making new 52-week lows edged down in December and remained slight. Investment managers may be expected to buy good-performing stocks to dress up their portfolios as the year comes to a close.

Thus, going into next week, the trend of stocks going up and mortgage rates going up remains intact, with pricing in Treasuries and MBS heading down. Price and yield move in opposite directions, so we would say that when Treasuries and MBS are down (in price and value) their yields (rates) are up.

Nonfarm payrolls rose 39,000 in November, according to the labor department report, with private hiring gaining only 50,000, just over a third of what economists had expected. The unemployment rate jumped to 9.8 percent from 9.6 percent in October.

The weak report was a surprise given the relative strength of some other recent economic signals, including robust retail sales. Economists had expected 140,000 new jobs and a steady unemployment rate.

While the data raised a warning flag, many analysts cautioned against reading too much into it.

Payrolls for September and October were revised to show 38,000 more jobs were gained in those months than previously estimated, taking some sting out of the report. Some economists said November's data was likely distorted by the way it was adjusted for seasonal fluctuations and said they expected a snap back in December.

The current market compels anyone who has not refinanced since April to seriously consider it now. Prospective real estate buyers also should wait no longer while rates remain in the vicinity of all-time lows and home prices remain down.

Contact me to prepare homeowners a refinance scenario, or to pre-approve a prospective buyer or to provide marketing tools for Realtors and Builders. Gary Moore 615-579-8658, email Gary@BrentwoodHomeLoan.com.

First Community Mortgage is a division of a locally owned community bank, and we control the loan process in-house as we underwrite all conforming and government loans. We fund the closings with our money, so no one has to wait on a distant wholesale division of a massive, national corporation to send funds.

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...by Gary Moore

Mortgage Planner, First Community Mortgage

...a subsidiary of First Community Bank

Cell: 615-579-8658 Toll-free fax: 866-321-6513

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(0% points, 1% origination. Market Update informs consumers and Realtors on market trends, offers subjective opinions and is not a quote for a unique borrower.)