Real Estate Market Update
Mortgage bond prices rose last week, which pushed mortgage interest rates considerably lower. Rates improved the first portion of the week as Greek debt default concerns dominated the news. The Fed kept rates unchanged Wednesday afternoon, extended the average maturity of their holdings, and indicated the goal of an exceptionally low fed funds rate through mid 2013. Stocks fell precipitously following the announcement and mortgage bond prices shot higher. The positive movement in mortgage bonds continued throughout Thursday. There was a sell off Friday following the run up in prices however mortgage bonds still ended the week better by over a full discount point.
The new home sales data Monday will set the tone for trading this week. The inflation data and Treasury auctions will also garner additional focus.
Real Estate Market
Mortgage bond prices fell last week, which pushed mortgage interest rates higher. Rates see sawed up and down as the data was mixed. Tame inflation data on the producer side helped rates stay low Wednesday. An unfortunate spike in inflation on the consumer side Thursday sent rates higher that day. Mortgage bonds ended the week worse by about 1/2 of a discount point.
The Fed meeting will be the focus this week along with Eurozone developments and trading in equities. While there are no rate changes expected from the Fed their post meeting remarks will be carefully analyzed. Last meeting they surprised investors with a specific targeted timeframe for low rates as opposed to their general goal of keeping rates low for “an extended period of time.”
Mortgage Applications on the Rise!
Mortgage applications rose 6.3% last week as more homeowners filed purchase applications and refinanced their home loans.
The Mortgage Bankers Association said its refinance index increased 6% last week after three weeks of declines.
The trade group said the refinance index is not seasonally adjusted but does include an adjustment for Labor Day. On an unadjusted basis, refinancings fell 15.2% and are down 23.5% from a year earlier.
The purchase index climbed 7% from a week prior, while the unadjusted purchase index fell 16.2%. The unadjusted overall composite index decreased 15.4% from the prior week.
The refinance share of mortgage activity represented 77.3% of total applications, compared to 77.1% a week earlier.
The MBA said the average interest rate for a 30-year fixed mortgage slid to 4.17% last week from 4.23% a week prior. The average rate for a 15-year fixed mortgage inched down to 3.4% from 3.41%
Market Trend
MARKET COMMENT
Mortgage bond prices were near unchanged last week, which kept mortgage interest rates relatively steady overall. Rates started off on a bad note the first portion of the week as equities rallied on news of a White House proposal to spend $300 to $400 billion for job creation. Fortunately the weekly jobless claims data Thursday came in higher than expected which reversed the earlier rate spikes. Stocks struggled Friday with some 100 points swings. Despite the volatility, mortgage bonds ended the week near unchanged.
The Treasury auctions this week will be watched carefully. If foreign demand falters rates could come under pressure. The inflation data Wednesday and Thursday may result in mortgage interest rate volatility.
LOOKING AHEAD
Economic
Indicator Release
Date and Time Consensus
Estimate Analysis
2-year Treasury Note Auction Monday,
Sept. 12,
1:15 pm, et None Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
10-year Treasury Note Auction Tuesday,
Sept. 13,
1:15 pm, et None Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
Producer Price Index Wednesday,
Sept. 14,
8:30 am, et Up 0.4%,
Core up 0.2% Important. An indication of inflationary pressures at the producer level. Weaker figures may lead to lower rates.
Retail Sales Wednesday,
Sept. 14,
8:30 am, et Up 0.3% Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates.
30-year Treasury Bond Auction Wednesday,
Sept. 14,
1:15 pm, et None Important. Bonds will be auctioned. Strong demand may lead to lower mortgage rates.
Weekly Jobless Claims Thursday,
Sept. 15,
8:30 am, et 410k Important. An indication of employment. Higher claims may result in lower rates.
Consumer Price Index Thursday,
Sept. 15,
8:30 am, et Up 0.5%,
Core up 0.2% Important. A measure of inflation at the consumer level. Lower than expected increases may lead to lower rates.
Industrial Production Thursday,
Sept. 15,
9:15 am, et Up 0.5% Important. A measure of manufacturing sector strength. A lower than expected increase may lead to lower rates.
Capacity Utilization Thursday,
Sept. 15,
9:15 am, et 77.5% Important. A figure above 85% is viewed as inflationary. Weakness may lead to lower rates.
Philadelphia Fed Survey Thursday,
Sept. 15,
10:00 am, et 4.0 Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates.
U of Michigan Consumer Sentiment Friday,
Sept. 16,
10:00 am, et 52 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
Market Comments
MARKET COMMENT
Mortgage bond prices rose last week, which pushed mortgage interest rates lower. Rates started off on a bad note the first portion of the week as equities rallied on hopes of additional Fed stimulus spending and stronger than expected data. Factory orders rose 2.4%, considerably higher than the expected 1.9% increase. Stocks took a roller coaster ride surging and falling hundreds of points throughout the week. The payrolls component of the employment report Friday disappointed estimates and helped rates improve significantly on the week. Despite the extreme volatility, mortgage bonds ended the week better by about 1/2 of a discount point.
The bond market is closed Monday for Labor Day. Trading may be volatile Tuesday following the extended holiday weekend. Equities will continue to factor into trading with the light data this week.
LOOKING AHEAD
Economic
Indicator Release
Date and Time Consensus
Estimate Analysis
Labor Day Monday,
Sept. 5 Important. May result in market volatility Tuesday following the extended holiday weekend.
Fed “Beige Book” Wednesday,
Sept. 7,
2:00 pm, et None Important. This Fed report details current economic conditions across the US. Signs of weakness may lead to lower rates.
Weekly Jobless Claims Thursday,
Sept. 8,
8:30 am, et 405k Important. An indication of employment. Higher claims may result in lower rates.
Trade Data Thursday,
Sept. 8,
8:30 am, et $53b Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
Consumer Credit Thursday,
Sept. 8,
3:00 pm, et $15.5b Low importance. A significantly larger than expected increase may lead to lower mortgage interest rates.
MORTGAGE PROFESSIONALS
Obtaining a mortgage is often a confusing task that can also lead to frustration. The reason for the confusion is due to the fact that mortgage financing is complex. The good news is that this complexity provides consumers with options and choices best suited to fit their needs.
Everyone’s financial position is unique. Some people have large cash reserves that can be used for down payments while others want to get into a home with little or no money down. Credit ratings vary from person to person. In addition, future plans vary. Some people plan on staying in their home for the rest of their lives while others only plan on staying for a few years.
These facts alone make comparing your mortgage to your neighbor’s based on rate alone a flawed endeavor, yet many people attempt to do so. Admittedly, everyone wants a good deal. Keep in mind that comparing rates is just one component of the entire mortgage. Other variables include the term, down payment requirements, income qualifications, credit ratings, reserve requirements, current debt, prepaid points, and many more.
A mortgage professional is able to take all of these variables that are unique to each individual and help a person obtain the mortgage loan that works best for their situation. The service they provide is time consuming and complex. However, the rewards of dealing with a professional carry forward throughout a borrower’s life. Making wise financial decisions today helps to pave the way for a safe and secure future.
Mortgage interest rates currently remain historically favorable. There is much uncertainty about the future of the economy. If the economy recovers and inflation emerges mortgage interest rates may head higher. Taking advantage of mortgage interest rates at these levels is a sure thing. A cautious approach to lock decisions is necessary to protect against the possibility of a future increase in mortgage interest rates.