Chico Market Update
MARKET COMMENT
Mortgage bond prices were near unchanged holding rates unchanged overall for the week. We started in positive territory as rates held low following the extended holiday weekend. Unfortunately some considerable stock strength pressured mortgage bonds lower and rates higher mid week. There wasn’t much data but the weekly jobless claims did come in better than expected which didn’t help rates. Rates initially fell by about 1/8 of a discount point the beginning of the week only to have those improvements erased Wednesday afternoon and Thursday morning.
The most important data will be the inflation releases the latter portion of the week. The Treasury will have another round of record auctions with a 3-year auction Monday, 10-year auction Tuesday, and a 30-year auction Wednesday. Foreign appetite for US debt will continue to play a key role in the ability of interest rates to remain low.
LOOKING AHEAD
| Economic Indicator |
Release Date and Time |
Consensus Estimate |
Analysis |
| Trade Data | Tuesday, July 13, 8:30 am, et |
-40.3B | Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates. |
| Retail Sales | Wednesday, July 14, 8:30 am, et |
Down 0.3% | Important. A measure of consumer demand. Weakness may lead to lower mortgage rates. |
| Business Inventories | Wednesday, July 14, 10:00 am, et |
Down 0.2% | Low importance. An indication of stored-up capacity. A significantly large increase may lead to lower rates. |
| Fed Minutes | Wednesday, July 14, 2:00 pm, et |
None | Important. Details of the last Fed meeting will be thoroughly analyzed. |
| Producer Price Index | Thursday, July 15, 8:30 am, et |
Up 0.1% Core up 0.1% |
Important. An indication of inflationary pressures at the producer level. Lower figures may lead to lower rates. |
| Industrial Production | Thursday, July 15, 9:15 am, et |
Up 0.2% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
| Capacity Utilization | Thursday, July 15, 9:15 am, et |
74.2 | Important. A figure above 85% is viewed as inflationary. Weakness may lead to lower rates. |
| Philadelphia Fed Survey | Thursday, July 15, 10:00 am, et |
8.6 | Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. |
| Consumer Price Index | Friday, July 16, 8:30 am, et |
Up 0.1% Core unchanged |
Important. A measure of inflation at the consumer level. Lower figures may lead to lower rates. |
RETAIL SALES
Retail sales data is the first indication of weakness or strength in consumer spending released each month. The Bureau of the Census of the US Department of Commerce provides information on how much the consumer spends on the purchase of goods. This data provides the consumption part of the gross domestic product. Retail sales data represents merchandise sold for cash or credit by retailers. Durable goods, such as autos, make up 35% of the figure. The balance consists of non-durables such as gasoline, restaurants, and general merchandise.
There are several drawbacks to the report. The data covers purchases of goods only, not services. It is also not adjusted for inflation and is extremely volatile. Economists are concerned that the current economic uncertainty will continue to curtail consumer-spending habits. Consumers have generally been given credit for sustaining the economy even amid the economic turmoil.
RATE LINK is provided by Market Information for Mortgage Professionals. 1-800-938-5193. Copyright 2010. All Rights Reserved. Mortgage Market Information Services, Inc. The information contained herein is believed to be accurate, however no representation or warranties are written or implied.
Free Homebuyer Workshop
I will be a guest speaker at the next Free Homebuyer Workshop at the Community Housing and Credit Counseling Center. 1250 Humboldt Avenue, Chico, CA 95928 Starts at 9am! If you want to know more about the home buying process, come check it out. Hope to see you all there.
What Causes Borrowers to Walk Away?
What Causes Borrowers to Walk Away?
While borrowers with “super prime” credit scores accounted for just 5 percent of the mortgage delinquencies, about 28 percent of their defaults were calculated and strategic.
This relatively small actual number is nevertheless causing the credit industry to look at new ways to evaluate walk-away risk even among the very creditworthy.
Credit bureau Experian reports that borrowers in California, Florida, and other hard-hit states are more likely to walk away than people living in states with more stable markets. Also, residents of states where lenders have no recourse are more likely to toss in the towel.
People with small amounts of negative equity also are more likely to stay and pay.
Source: Washington Post (07/03/2010)
WCR Nor Cal and the Sacramento of Association of Realtors to host Diversity Class
Please join the WCR Nor Cal and the Association of Realtors of Sacramento for a great class on Diversity. To register go to the link below.
www.coachingtoexcellence.com/ahwd
Market Update
MARKET COMMENT
Mortgage bond prices rose last week pushing mortgage interest rates lower. We started the week in positive territory as oil prices fell amid reports that supplies increased and adverse weather may miss the Gulf. Stocks generally struggled. Global economic instability continued which resulted in increased demand for mortgage bonds. The employment report was mixed with the unemployment rate a better than expected 9.5%. However, the payrolls component was weaker than expected and helped bonds stay positive Friday morning. Rates fell by about 1/2 of a discount point for the week.
Traders will look to stocks, oil prices, and continued global conditions with the lack of significant data this week. The bond market is closed Monday for the holiday. Trading conditions may be choppy Tuesday morning as trading resumes following the extended holiday weekend.
LOOKING AHEAD
| Economic Indicator |
Release Date and Time |
Consensus Estimate |
Analysis |
| Bond Market Closed | Monday, July 5 |
- | Important. Closed for 4th of July Holiday. Shortened trading week may result in interest rate volatility. |
| Weekly Jobless Claims | Thursday, July 8, 8:30 am, et |
450k | Important. An indication of employment. Higher claims may result in lower rates. |
| Consumer Credit | Thursday, July 8, 3:00 pm, et |
Down $2 billion | Low importance. A significantly large increase may lead to lower mortgage interest rates. |
CREDIT DEMAND
Inflation is typically the most important focus for the mortgage interest rate market. Inflation remains a concern as the Federal Government continues to print and spend money in an effort to spur the economy. Unfortunately, mortgage interest rates also continue to be pushed around by gyrating stocks and weak demand as performance uncertainty looms. Most of the recent increases in interest rates have come following stronger stocks. As stocks struggle we often see rates improve. In addition, mortgage bonds have benefited from global economic uncertainty as investors search for safe havens amid sovereign debt defaults in Greece. This flight to quality buying of mortgage bonds has pushed prices higher and mortgage interest rates lower.
The level of interest rates reflects the balance between the supply of money from investors and the demand for money by borrowers. Rising inflationary expectations and uncertainty about the performance of the debt cause investors to require higher rates of return on investments to compensate for the erosion of the principal that eventually is returned to them or the risk of non-performance. Regardless of inflation levels, though, rising economic activity can increase the demand for investors’ funds, and thereby lead to higher interest rates. Investors pulling money out of bonds and into stocks could pressure mortgage rates.
The demand for money diminishes as the economy struggles. The Fed lowers interest rates as an incentive to businesses and consumers to increase their borrowings. The Fed hopes manufacturers will increase their investments in plants, equipment and inventories and that consumers will push housing construction along with consumer spending and with that, consumer debt.
Analysts will monitor this week’s consumer credit levels. There is much debate in the financial community about the future. Economists, market analysts, and traders all seem to have a different opinion about the future state of the economy and especially whether or not we have hit the bottom of the economic slide. One thing most market participants agree on is both the bond and stock markets are going to see additional volatility. Now is a great time to take advantage of rates at the still historically favorable levels.
RATE LINK is provided by Market Information for Mortgage Professionals. 1-800-938-5193. Copyright 2010. All Rights Reserved. Mortgage Market Information Services, Inc. The information contained herein is believed to be accurate, however no representation or warranties are written or implied.