Entries from July 2010 ↓
July 19th, 2010 — Mortgage Industry News
Mortgage markets improved for the 5th straight week last week as consumer confidence waned and inflation data tamed. Investors ignored the news that 19 of 23 reporting S&P 500 companies beat their respective earnings estimates and sold off on stocks.
There’s concern about a potential economic slowdown for the months ahead and it may be well-founded.
Despite an improving jobs situation and booming retail sales, households are less optimistic about the future and so is the Federal Reserve. In its post-meeting minutes released last week, the Fed revised its U.S. growth estimates downward for 2010 and 2011.
For rate shoppers, this is excellent news.
Because of the weakness, conforming mortgage rates fell again last week, extending the current rally in rates to 16 weeks. Mortgage rates are lower than at any time in measured history.
This week, data will be housing market-heavy and mortgage rates could rise or fall.
• Monday : National Association of Home Builders Index
• Tuesday : Building Permits and Housing Starts
• Thursday : Existing Home Sales
Strength in any, or all three, of these housing-related reports should push mortgage rates higher on higher hopes for the economy. Weakness, on the other hand, should have the opposite effect.
Overall, though, mortgage markets are trending better. Momentum is in effect and refinance activity is soaring. That said, it doesn’t mean that rates won’t rise — they could absolutely. It just takes a change in market sentiment. And that could happen quickly.
Mortgage rates are artificially low right now so even the slightest jolt could cause them to spike. It would be similar to what happened in June 2009 when rates rose 1.125% in just 10 days’ time.
There’s very little room for rates to fall further but a lot of room for rates to rise. Make sure you’re on the right side of that bet.
July 12th, 2010 — Mortgage Industry News
Mortgage markets improved again last week — if only barely — throughout a holiday-shortened week devoid of “major” data and market conviction.
Up-and-down trading characterized the week which ended with mortgage rates slightly lower versus the week prior.
Mortgage rates have fallen in 4 consecutive weeks and are on an extended rally that dates back to mid-April.
This week, however, data returns and rates could reverse. Especially with inflation numbers are in play.
Inflation is the enemy of mortgage rates.
Inflation is bad for mortgage rates because mortgage rates based on the price of mortgage-backed bonds. When inflation pressures mount, the demand for mortgage-backed bonds wanes and that pushes bond prices down which, in turn, pushed bond yields (i.e. rates) up.
There’s three pieces of inflation-related news this week.
The first inflation-related story is the Federal Reserve’s Wednesday release of the minutes from its last meeting. Now, when the Fed adjourned June 23, it said “underlying inflation has trended lower“. However, there was more to the conversation that what the FOMC released in its post-meeting statement.
Markets will be looking for clues.
Then, Thursday, the Producer Price Index is released. The Producer Price Index is a measure of business operating costs. When PPI is increasing, it means that “doing business” is more expensive — an inflationary situation. It’s inflationary because higher business costs are often absorbed by consumers in the form of higher prices for goods and services.
A rising PPI is usually bad for mortgage rates.
And lastly, Friday, the Consumer Price Index is released. The CPI measures the average American’s “cost of living”. Like PPI, when the Consumer Price Index is rising, mortgage rates tend to follow.
Other releases of import this week include Retail Sales and two consumer confidence surveys.
Last week, mortgage rates again made new all-time lows. Mortgage rates can stay low for a long time, but they can’t stay low forever. Lock your rate while you can.
July 6th, 2010 — Mortgage Industry News
Mortgage markets improved last week as economic data revealed a slowing U.S. economy.
Major stock indices fell to 2010 lows in response to a weak jobs report among other data points, forcing worldwide investors into the relative safety of U.S. government-backed bonds. This category includes mortgage-backed bonds and the extra demand helped to drop rates.
Once again, mortgage rates improved and Freddie Mac is reporting new all-time lows on three popular, conforming loan products:
• The 30-year fixed rate mortgage
• The 15-year fixed rate mortgage
• The 5-year adjustable rate mortgage
Low rates mean low payments and you can’t know your options until you ask.
This week, mortgage rates may move slowly. There’s very little data set for release because markets were closed Monday in observance of Independence Day, and because the second calendar week of a month is traditionally data-slow.
Tuesday, a consumer confidence study is published; Thursday, jobless claims plus consumer credit levels hit; and, Friday, we’ll see wholesale inventories. That’s about it. None of these reports are particularly important but, in aggregate, the numbers can show whether the economy is expanding or contracting.
In general, evidence of an expanding economy should cause mortgage rates to rise. In a contracting economy, rates are likely to fall.
Once mortgage rates start to reverse higher, they’re expected to reverse quickly.
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