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August 16th, 2019 1:24 PM
This past week we watched Bond yields/interest rates decline around the globe on rising fears of a global recession. 

It's worth noting that home loan rates did not partake in the declining interest rate party this week as the Treasury market, not the Mortgage Backed Security market, received the majority of investment dollars. 

A recession is defined as two consecutive quarters of negative growth, so when Germany reported its economy shrank or contracted, financial markets were spooked and investors fled into the safe haven of the U.S. dollar and U.S. denominated assets like Treasuries. 

The flood of capital into the U.S. caused our 10-year Note yield to drop sharply and beneath that of the 2-year Note yield, causing a yield curve inversion for the first time since 2007... right before the global financial crisis. 

History has shown that each time the 10-year yield moved beneath the 2-year yield in the last 50 years, a U.S. recession followed sometime in the next 22 months. 

So, is the U.S. headed for a recession? Maybe, and the chances increase everyday as the U.S. economy is in the midst of the longest economic expansion (without a recession) in our nation's history.

Could the yield curve inversion be a false signal this time around? Also, a maybe. 

With term premium or the added yield investors demand to park their money in long-term Bonds declining for over 30 years, it's more likely to see yield curve inversions today. And with global yields collectively at 120-year lows and negative around much of the globe, money is literally pouring into our Treasury market as our anemic 1.59% 10-year yield is relatively attractive. 

The chance of a recession in 2020 has climbed to about 30%. It will be interesting to see what happens with a couple of Fed rate cuts before 2019 ends. 

A U.S./China trade deal, while not likely soon, would go a long way to help lift uncertainties and help many global economies possibly avoid recession. 

Bottom line: the risk of recession has risen, but we are not seeing a recession in the cards at the moment. Being the cleanest shirt in the laundry, the U.S. is attracting investment dollars in droves and helping cause an inversion. Home loan rates have not declined further as the gains in the Bond market have been limited to the Treasury market. So if you are in the market to either buy a home or refinance, today is a great day to do so.

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Posted by Eric Fang on August 16th, 2019 1:24 PMLeave a Comment

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August 14th, 2019 10:29 AM
The DOW was down around 750 points, but the interest rate is not getting lower. The lender is unwilling to give low mortgage rates unless Fed lowers rates again.  Another reason the treasury bonds are higher, but not MBS(Mortgage backed security). So the mortgage rate is not lower.

Also, the lenders will not lower the rates too much when they have lots of businesses. It reminds me of Apple who did not lower the IPhone price when the demand was strong.

I cleared two retirement accounts Monday. All are in cash now. Though not at the best level, but it was ok as long as I can get in later at a cheaper price. I still remembered my 94k investment in index funds in 2008 turned to 400k (last year and this year). Though I will not sell that account, I believe the market will go lower in the next two years. 

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Posted by Eric Fang on August 14th, 2019 10:29 AMLeave a Comment

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August 7th, 2019 5:07 PM
I do not know why I did not talk too much about my marathon on 07/28/2019. Actually it was one of my best marathons.

The weather was a little bit higher than normal, so we felt hot and humid for the last a few miles. 

For the first a few miles, I felt my calf a little bit stiff, so I took it easy, and ran slowly. My breath was not good, so I ran based my heart rate monitor, not by the pace. I know I should keep the HRM reading under 150.

After a few miles(6-7 miles), my legs were better, and I can overpass some runners, since it was on the golden gate bridge, so I had to follow other runners, and HRM reading was still pretty good.

This was a hilly course, a little uphill and downhill. Normally we should feel happy when we have downhill, but since it was too steep, we still can not run too fast. But It was ok, by the HRM reading.

I was very busy for the loan business in June and July(I closed over 10m in July), so I had barely training in June, and most of my "real" training was in July. I ran a few tempos and a few intervals. Though I know It's hard for me to keep the pace around 7:26 level, but 7:36 level should be alright.(I plan to run 7:26 in Berlin).

Since I ran slowly at the beginning, I did not feel much tired for the last a few miles, It was only around 20-30 seconds slower. And my finish time is 3:36:52. Very good one for the San Francisco Marathon.

And I also registered for 2020 SF marathon again. I might use the same strategy for Berlin Marathon. 

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Posted by Eric Fang on August 7th, 2019 5:07 PMLeave a Comment

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August 7th, 2019 4:20 PM
Some borrowers switched from 30 yr fixed to 15/1 ARM recently. 15/1 ARM is a new loan program which fixes the rate for the first 15 years, and the rate is not bad. The rate is around 3.875%, for the right loan amount and LTV.

Please let me know if you are interested.

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Posted by Eric Fang on August 7th, 2019 4:20 PMLeave a Comment

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Now, the gap between the purchase loan and refinance loan is 0.225%. That means purchase loan rate is 0.225% higher now. So we can relax and enjoy the summer. Maybe not, I still have another 10m loans to process.

And yes, I ran San Francisco Marathon over the weekend. The finish time is 3:36:52. Not bad for a hilly course.

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Posted by Eric Fang on July 29th, 2019 8:24 AMLeave a Comment

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July 26th, 2019 7:43 PM
The financial markets are bracing for a multitude of headline risk events in the upcoming week and traders are reluctant to place bets on the next market move in advance of the news. More on this in the forecast below. 

The European Union continues to struggle economically. This past week Germany posted very weak economic numbers and manufacturing data, and as a result the European Central Bank said they are prepared to offer more stimulus to help their economies. The bad news in Europe pushed their Bond yields lower, and in turn helps push U.S. Bond yields and interest rates lower. 

Here in the States, the U.S. remains the "cleanest shirt" in the laundry when compared to other global economies. This past week we saw strong Durable Goods Orders, which highlights the strength of the U.S. consumer, the shortest unemployment line in over 50 years, and strong corporate earnings reports. 

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Posted by Eric Fang on July 26th, 2019 7:43 PMLeave a Comment

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This past week had little economic data for the financial markets to react to. As a result, home loan rates have inched higher though they remain near multi-year lows. 

Take a look at the chart below. It's pretty easy to see the sideways trend in mortgage Bonds and the reason why home loans have stabilized since the beginning of June. 

It is normal to see quiet sideways trading action in the summer months, especially with the U.S./China trade war punting into the future and the Fed about to cut rates at month's end. Traders are more apt to sit on their hands and wait for the next directional move in the financial markets. 

What should we expect next for home loan rates? Volatility. Long, boring and complacent sideways trading patterns like we are seeing in mortgage Bonds are typically followed by an increase in volatility, and a sharp breakout one way or the other. 

How mortgage Bonds respond to the Fed Statement and rate cut on July 31 may very well determine the next directional move in home loan rates. 

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Posted by Eric Fang on July 19th, 2019 3:01 PMLeave a Comment

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July 12th, 2019 11:43 AM
Sorry for not being able to write more blogs now. Not sure why. Maybe because I was busy, or maybe just simple lazy. This is a problem with a rider and the elephant. The rider wants to go that direction, but the elephant did not want to go.

Anyway, I had tons of "excuses". I travelled a lot during the last 30 days, anyway, I added 3000 miles on my car. Just family visits, or drove to meet the friends, or drove the relatives to the tourist areas. Or simple to LA to visit my daughter. And because I worked too hard(I already closed 7M loans in July), my back hurts. I think it was a combination of working too many hours and driving too many miles. So I went for a few massage trips, and finally I t is getting much better.

Started training for Berlin Marathon. I felt great(at the training), at the mean time, I felt like getting older, it is so hard for me to push for 7 minute pace, though I know I do not have to. Maybe I simply needs more rest.

Finished reading the book Switch. And left the book with my daughter last weekend when I visited her. And she finished her book "Becoming", that's how I started reading this week. Though busy, exercising would be the first priority, and the reading the 2nd.

There is a new definition of law of diminishing marginal utility. People should not focus on something with diminishing marginal utility, something like Money. Extra money will not make you feeling extra happiness. For those days when I felt the back hurted, I realized the importance of healthy body. Yes, health is more important than anything else.

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Posted by Eric Fang on July 12th, 2019 11:43 AMLeave a Comment

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June 30th, 2019 9:30 PM
I was so buy for the last month, and I finally had some sound sleep this week. For the past week, I was able to close 3 purchases(all with 21 days of closing). I was so tired, and decided to slow down from now on, maybe for the rest of this year.

I finally had the time to update the Book list. Here s the link. I will read more books in the 2nd half of 2019.

And change for me, I started regular training. I ran 10 miles, biked 10 miles and had 1 hour workout today. I think I should be ready for the Berlin Marathon. Here is the plan for the next week.

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June 27th, 2019 10:43 PM
This is the first week for the 3 month training. I started with 6 easy miles Monday, 10 miles Tuesday(5X1K interval plus 3 miles Tempo); And 10 miles Thursday(6 Miles Tempo). I can still managed the pace under 7:30. That's my goal. Not too fast not too slow. I hope I can build up the momentum.

Worked like crazy recently. Still have 18m loans after lots of loans closed. Rate were good, referrals are coming. And some agents just got me 21 day closing loans. Yes, I got 4 of them done(one closed June 19th, One Closed 27th, another will be closed 28th, and one more July 2nd). 

Sometimes I think it is not worth it to work that hard. It is just because of some kind of pride. When the agents complimented me of being able to do the loans within 21 days, and still with good rates, Then I felt good, and worked like a slave, the slave of fame, slave of stupidity and slave of compliments.

And this week, I started training again, for the marathon. And everyone, wish me good luck, I will enter the lottery for next year's Tokyo Marathon. Wish me good luck, and I will get in. 

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Posted by Eric Fang on June 27th, 2019 10:43 PMLeave a Comment

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This past week the Federal Reserve, aka "The Fed", held their June meeting and as expected, left rates unchanged. 

However, they said some key things which helped both Stocks and Bonds move nicely higher, with rates touching the best levels in 21 months. 

The Fed removed the word "patient" in their Monetary Policy Statement to describe their monetary policy approach. This means they will react quickly with a rate cut and not be so "patient" in the future. 

They also cited many "uncertainties" that may require a Fed rate cut -- slowing global economies, trade and disinflation. 

One part of the Fed's dual mandate is price stability or inflation, and with inflation moderating the Fed wants to do what it can to "allow" inflation to rise -- they see cutting rates as a measure. 

So now, financial markets are fully expecting a rate cut at the July 31 meeting. 

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Posted by Eric Fang on June 21st, 2019 9:34 AMLeave a Comment

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June 20th, 2019 10:28 PM
Yes, I am back!! I am extremely busy for the past 3 weeks. Work on 4 purchases with only 21 closing days. I told the agent No 21 closing days unless you have underwriter reviewed pre-approval with me. And other than that, I have close to 20M loans to process. Sorry, a little bit tired, everything is under control. The old Eric is back, the only difference is Eric no longer young any more. So I will have to work smartly.

 Started running again. I felt like I have to exercise a lot to keep myself fit. I like to eat dark chocolate, it might make me gain some weight. Glad I can still run lose the weight. Ran 6 miles today, with 3 miles for the pace around 7:20. Still good shape for Berlin Marathon.

I thought it over the weekend. The exercise, the healthy body is more important. So I will keep the training schedule no matter how busy I am. And also I am back to my reading schedules, 20 pages yesterday, 20 pages today for "Switch". I finished page 80 of this book now. Here is the book link. The another name of the book is: Switch: How to Change Things When Change is Hard.  Yes, indeed.

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June 15th, 2019 11:13 AM
What a difference a month makes.

In May, stocks fell sharply, and interest rates declined each week. June has been a different story. The Fed has signaled rate cuts are likely coming. Stocks have been rallying higher, and the decline in interest rates has stalled.

The Fed can't control home loan rates. Those move mainly on inflation and expectations of inflation in the future. Inflation has remained tame for the past decade and is the main reason why home loan rates have stayed low as well.

This past week, we received another reading on consumer inflation, the Consumer Price Index (CPI), which confirmed there are no price pressures or inflation threat to the economy.

The result: the odds of a Fed rate cut have climbed to 85% for the July Fed Meeting on the idea that the Fed can comfortably cut rates and "allow" inflation to creep into the economy.

Also keeping home loan rates near two-year lows is the uncertainty and lack of resolution with the US/China trade turmoil. The next step is a potential meeting between US and China at the G20 Meeting June 28-29. Mark your calendar. This is an important event, because as this trade dispute goes so do the economies around the globe. 

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Posted by Eric Fang on June 15th, 2019 11:13 AMLeave a Comment

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Fed Chairman Jerome Powell signaled an openness to cutting interest rates, pledging to keep a close eye on trade fights between America and its largest trading partners. Powell, under pressure from President Donald Trump to ease borrowing costs, said “we do not know how or when these issues will be resolved.” 

Here is the story, I have a client who kept asking me for the rate. His rate is 4.375%, and then he said that he would refi when the rate is 4%. When it reached 4%, he said that he would like to wait for 3.875%; when the rate was 3.875%, now he would like to wait for 3.5%.

Here is my explanation, there is a cost while you wait. Let's assume you can get 3.5% Sep 2020. And when you get the rate, and another 16 months already passed. I wrote a blog a about 10 years ago. It still works here, only the rate in the example was much higher than the current market rate, here is the link: http://www.ericfang.com/stagingrefi

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Posted by Eric Fang on June 4th, 2019 2:58 PMLeave a Comment

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Home loan rates are driven by the trading activity of mortgage-backed securities, and not how the 10-year Note yield moves. 

When there is global unrest like we have seen this past week, investors around the globe look to park their money and investments into the "safe-haven" of the US Dollar by purchasing the US 10-year Note. Hence the reason for the larger decline in 10-year Note versus mortgage backed-securities and home loan rates. 

I copied above from a magazine I subscribed. But there is another reason, the current Fed fund rate is 3.5%. If we expect much lower rate from the current level, Fed has to lower the interest rate first.

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Posted by Eric Fang on June 1st, 2019 10:54 AMLeave a Comment

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May 29th, 2019 12:39 PM
I have only a few borrowers who insisted on the fixed interest rates. Eve though I told them that the difference is almost 1% now. And I explained further that it does not make any sense to have fixed 30 yr fixed rate when the interest rate is going lower, and lower. It simply does not make any sense. I mean, especially for the Jumbo loans.

Anyway, I called my friend yesterday and told her that I would refer all my 30 yr fixed clients to her. Basically for two reasons, 1)My jumbo 30 yr fixed is not good. Or most of the other lenders rate not good either 2)It is a little bit against my belief, that the interest rate is starting lower, and then lower.

I am happy running again, especially with my wife. Yes, we are running together in the morning, she will train for the San Francisco Half Marathon, and I for SF Marathon. The finish time is not important. The whole process is.

And we decided, if the training goes well, we will run Paris Marathon in 2021. That would be my 30ish marathon, and her 2nd one. It would be fun. It does not matter whether we will finish it around 5 hours or more than 5 hours. We will feel happy even for the 26.2 miles on the street of Paris.

Then I will have to work hard again, to finish more loans. But my business already about 400% of the volume of last year.  But running is still more important than the mortgage loans.

And I think I might have the best Rental rates on the market. I got a lot of loans, referrals. Can not believe that rental rate can be as low as 3.5% to 3.625%(or 3.875% for small loans), APR is still 4.37% though. But ARM Apr is higher anyway.

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Posted by Eric Fang on May 29th, 2019 12:39 PMLeave a Comment

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The ongoing and unresolved US/China trade turmoil is the biggest story to follow right now. The uncertainty and negative headlines associated with the negotiations have pushed Stocks lower for most of May, with Bonds and home loan rates being the beneficiary.

We would like to think that the talks over the past year or so will bring forth a positive agreement -- but it's unclear whether this will come to pass. The next round of talks is scheduled for June 28-29 at the G20 meeting, so there is likely to be no progress before this time. If that is the case, US interest rates will remain near multi-year lows.

One thing's for sure...the Fed will not be hiking rates anytime soon if this trade turmoil goes unresolved or escalates. In fact, there's actually a chance we see a Fed rate cut in 2019 -- especially if the US economy reacts poorly to the US/China trade dispute.

It's important to understand that this story, while very negative and uncertain at the moment, could change very quickly. If a positive resolution comes to pass, we should expect Stocks to reclaim all of their recent losses and more -- all at the expense of bonds and home loan rates. 
 

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Posted by Eric Fang on May 27th, 2019 11:42 AMLeave a Comment

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We just got the email today, that our refinance rate will be higher next month. So if you plan to refi, then we still have two more weeks.

And also, our rental refi rate was pretty good. I did a lot of loans with rental rates around 3.625% to 3.75%(APR 4.62%), not bad for the rentals. Actually this is one of our niche market.

And one more thing, we will start posting rates after August.

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Posted by Eric Fang on May 21st, 2019 4:40 PMLeave a Comment

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The biggest story in the financial markets and around the globe is the ongoing US/China trade negotiations.

At the moment, there is no resolution and it appears there will be no resolution for at least several weeks as the US and China are not expected to talk again until the G-20 Summit June 28-29.

The uncertainty surrounding the talks helped home loan rates improve this week, and are at lows seen in January 2018.

The US, China and the entire globe would benefit from a deal and should it happen, Stocks will likely recover all of their recent losses and then some. At the same time, should the story drag on and escalate as higher tariffs are instituted -- it would have a negative effect on global economies and Stocks may suffer as home loan rates improve further.

Looking at the US economy, it continues to do very well. Walmart posted incredibly strong corporate earnings this past week. Seeing they have $500B in annual sales -- if Walmart is doing well, the US economy is doing well.

In housing news, April Housing Starts and Building Permits came in higher than expectations, providing further evidence of confidence in the sector.

Bottom line: The backdrop to housing could not be much better. The economy is strong and home loan rates are historically low. Today presents an incredible window to consider buying or refinancing a home.

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Posted by Eric Fang on May 17th, 2019 6:54 PMLeave a Comment

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May 16th, 2019 10:27 PM
Still in the middle of the recovery from the last 3 marathons. Started running slowly Monday and Wednesday. And I planned to do 3 miles tempo run, but slowed under 8 min/mile for the 3rd mile. And I think the watch is smart, it asked me to recovery for another 26 hours.

So far closed 23m loans for this year, and have 10m loans in the pipeline. Not bad after one month of vacation and 4 marathons under the belt for the 1st half of this year.

Finished reading a lot of books on the travel. Did not update the reading list yet.

Quoted a few good rates yesterday. 30 Yr fixed 3.875% for Conforming and Jumbo loans. The Jumbo rate was gone today. 15 Yr fixed is still good.

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Posted by Eric Fang on May 16th, 2019 10:27 PMLeave a Comment

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May 8th, 2019 12:30 PM

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May 6th, 2019 9:41 AM
Just finished Vancouver with 3:43:57. So I ran 3 marathons for the past 3 weekends in 3 different countries(04/21 Nanjing China; 04/28 Big Sur Marathon; 05/05 Vancouver). Too many loans this weekend. I know I normally have lots of request when I ran the marathon. I can see those emails from my Garmin watch, though I was not distracted. Life back to normal.

I updated my marathon completion list: http://www.ericfang.com/MarathonCompleted

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Posted by Eric Fang on May 6th, 2019 9:41 AMLeave a Comment

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The economy data is very good, and Apple beat earnings again. And it seems like that the rate might go a little bit higher. But still the rate is very low, even compared the rates with end of last year.

I become a rental purchase/refinance expert now. This year, I completed one rental purchase in Las Vegas, and am working on another rental purchase in TX. 

For out of state loans, I prepared pre-approval for Austin, Seattle and Boston. Yes, the rates are pretty good.

Also, we can do rental refinances if you have more than 4 financed properties. The rate is still around 4% for 7/1ARM(APR 4.7%) with no closing cost if the LTV is good, like less than 50% for cash-out, less than 60% for no cash-out.


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Posted by Eric Fang on April 30th, 2019 5:07 PMLeave a Comment

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April 26th, 2019 3:40 PM
Good news is typically bad news for Bonds and home loan rates. That has not been the trend of late, and certainly not this past week. 

Durable Goods Orders is a report which shows buying demand for products with a life cycle beyond 4 years -- think cars, washing machines and planes. And that buying demand of long-lasting goods is up at the highest levels since last summer, highlighting that the US economy continues to grow, and consumers and businesses feel confident in investing. 

Adding to the good-news week were continued strong corporate earnings reports, and future guidance from the likes of Amazon, Microsoft and Facebook. 

Finally, the first look at 1st quarter GDP showed the US economy grew at a blistering 3.2% pace -- way above economists' expectations of 1.9%. The US economy is reaccelerating. 

In the face of all the good news, home loan rates held steady and remain near one-year lows. 

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Posted by Eric Fang on April 26th, 2019 3:40 PMLeave a Comment

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he economic data coming out of the US this week showed that not only is a recession highly unlikely anytime soon, but the economy is actually reaccelerating from the slowdown seen last Fall. 

Back in October and November, the Fed was very hawkish and suggested that three rate hikes would come in 2019. This caused angst and fear that economic conditions would slow to a recession. It also led to a sharp decline in Stocks and consumer confidence. 

Fast forward just a couple months to January 2019, and the Fed completely reversed their position, and signaled there is no rate hike coming in 2019 or anytime soon. This new "wait and see" position from the Fed has set off a rally in Stocks and a surge in consumer confidence. 

It has also sparked confidence and certainty in the business climate, thereby giving corporations reason to hire and retain employees. 

And that was clearly evident this week as we saw yet another decline in Initial Jobless (Unemployment) Claims and the rate at which people are being fired from their jobs. 

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Posted by Eric Fang on April 24th, 2019 7:49 AMLeave a Comment

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The economic data coming out of the US this week showed that not only is a recession highly unlikely anytime soon, but the economy is actually reaccelerating from the slowdown seen last Fall. 

Back in October and November, the Fed was very hawkish and suggested that three rate hikes would come in 2019. This caused angst and fear that economic conditions would slow to a recession. It also led to a sharp decline in Stocks and consumer confidence. 

Fast forward just a couple months to January 2019, and the Fed completely reversed their position, and signaled there is no rate hike coming in 2019 or anytime soon. This new "wait and see" position from the Fed has set off a rally in Stocks and a surge in consumer confidence. 

It has also sparked confidence and certainty in the business climate, thereby giving corporations reason to hire and retain employees. 

And that was clearly evident this week as we saw yet another decline in Initial Jobless (Unemployment) Claims and the rate at which people are being fired from their jobs. 

Bottom line: the economic resurgence has put upward pressure on rates this past week, but they remain near 12-month lows. 

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Posted by Eric Fang on April 24th, 2019 7:48 AMLeave a Comment

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Have to focus on my loans now. I took one vacation to Spain the end of March. Then another two weeks in China from August 9th to April 22nd. And now I am available.

While I was in China, I ran a marathon there, NiuShounShan Marathon. The finish time was 4:14:24. My slowest one.

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Posted by Eric Fang on April 24th, 2019 7:22 AMLeave a Comment

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April 1st, 2019 9:40 AM
That is the best way to describe the current home loan rate environment. This past week we saw mortgage rates experience their largest one-week decline in 10 years!!!

What caused the sharp decline in home loan rates? Recessionary fears, and the likelihood the Fed's next move on rates may be a cut and as soon as this year.

The Treasury's Two-Month Bill yielded 2.40% this past week and the 10-Year Note yielded a low of 2.34%. This "inverted yield curve", where short-term Bonds yield more than long-term Bonds, elevated the recession talk.

Bond yield curve inversions are not always accurate, and the lead time to a recession can be as much as three years.

It will be more important to track how the 2-Year Note, presently yielding 2.23%, performs against the 10-Year Note in the weeks and months ahead, because a sustained inversion between them would be a more serious recessionary signal.

The financial markets were spooked this week when potential Federal Reserve Board Nominee Stephen Moore said if he were brought onto the Fed, he would immediately vote for a .50% cut to the Fed Funds Rate. This surprise statement brought uncertainty to the financial markets, which led to Stocks moving lower and Bonds moving higher in price.

Bottom line: Inflation is not a threat, and was evidenced in last Friday's PCE reading of just 1.8% year-over-year. Plus, the idea that the Fed may now cut rates next means this complacent "wait and see" attitude may continue to keep home loan rates at low levels for the spring home buying season, and more.

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Posted by Eric Fang on April 1st, 2019 9:40 AMLeave a Comment

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March 22nd, 2019 7:37 AM
On all the loan programs. And yes, we will have lower rates for the next 3-5 years. Why take 30 yr fixed? It is the time for ARMs now.

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Posted by Eric Fang on March 22nd, 2019 7:37 AMLeave a Comment

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March 20th, 2019 11:05 PM
A client asked me today. And I said that the rate will start going down, and it will go down for the next 3-5 years. I hope I am right again this time.

Some good rates, 15 yr fixed 3.625% conforming; 30 yr fixed 4% now. Some 10/1 ARM rental 4.25% percent. Let's put APR 4.76% for 30 yr fixed or ARM. Those rates are for no closing cost at all.

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Posted by Eric Fang on March 20th, 2019 11:05 PMLeave a Comment

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