Real Estate Market Update

Mortgage bond prices were slightly higher last week but not enough for mortgage interest rates to see any considerable improvements. Rates came under pressure early in the week as the IMF looked to spend billions of Euros to help stem the debt concerns. Rates bounced back following the Fed meeting Tuesday and stayed relatively in check throughout the rest of the week with choppy but tight trading. The consumer and producer inflation data was mixed with core CPI data slightly higher than expected and core PPI data weaker than expected. The debt auctions generally showed strong foreign demand. Mortgage bonds ended the week better by approximately 1/8 of a discount point.
LOOKING AHEAD
Economic
Indicator Release
Date and Time Consensus
Estimate Analysis
Treasury Auctions Begin Monday,
Dec. 19,
1:15 pm, et None Important. There will be auctions Monday 2Y, Tuesday 5Y, and Wednesday 7Y.
Housing Starts Tuesday,
Dec. 20,
8:30 am, et 615k Important. A measure of housing sector strength. Weakness may lead to lower rates.
Existing Home Sales Wednesday,
Dec. 21,
10:00 am, et 4.9m Low importance. An indication of mortgage credit demand. Significant weakness may lead to lower rates.
Weekly Jobless Claims Thursday,
Dec. 22,
8:30 am, et 369k Important. An indication of employment. Higher claims may result in lower rates.
Q3 GDP Third Estimate Thursday,
Dec. 22,
8:30 am, et Up 1.9% Important. The aggregate measure of US economic production. Weakness may lead to lower rates.
U of Michigan Consumer Sentiment Thursday,
Dec. 22,
10:00 am, et 67.7 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
Leading Economic Indicators Thursday,
Dec. 22,
10:00 am, et Up 0.5% Important. An indication of future economic activity. A smaller increase may lead to lower rates.
Durable Goods Orders Friday,
Dec. 23,
8:30 am, et Down 0.2% Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates.
Personal Income and Outlays Friday,
Dec. 23,
8:30 am, et Up 0.2%,
Up 0.1% Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates.
PCE Core Inflation Friday,
Dec. 23,
8:30 am, et Up 0.1% Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve.
New Home Sales Friday,
Dec. 23,
10:00 am, et 298k Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.
FED STATEMENT
The Fed statement from the meeting last week indicated, “The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities.” This is generally good news for mortgage interest rates in the short term as the Fed buying keeps MBS prices high and rates low. However, this is no guarantee that mortgage interest rates will continually push lower. The Fed noted they will “regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.” Rates are historically very favorable and financial conditions can change daily. Remember, the current rates are a given.