Market Update
MARKET COMMENT
Mortgage bond prices rose pushing mortgage interest rates lower. Higher than expected weekly jobless claims and continued claims helped mortgage interest rates remain very favorable. Higher than expected existing home sales and leading economic indicators data prevented rates from improving dramatically. Stocks remained volatile, which also resulted in some mortgage interest rate volatility.
Rates fell by about 1/8 of a discount point for the week.
The most important data will be the gross domestic product and employment cost index. The Treasury auctions may also result in mortgage interest rate volatility as foreign appetite for US debt instruments is gauged.
LOOKING AHEAD
| Economic Indicator |
Release Date and Time |
Consensus Estimate |
Analysis |
| New Home Sales | Monday, July 26, 10:00 am, et |
Up 12.6% | Important. An indication of economic strength and credit demand. Weakness may lead to lower rates. |
| Consumer Confidence | Tuesday, July 27, 10:00 am, et |
51.5 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
| 2-year Treasury Note Auction | Tuesday, July 27, 1:15 pm, et |
None | Important. $38 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Durable Goods Orders | Wednesday, July 28, 8:30 am, et |
Up 1.25% | Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates. |
| 5-year Treasury Note Auction | Wednesday, July 28, 1:15 pm, et |
None | Important. $37 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| 7-year Treasury Note Auction | Thursday, July 29, 1:15 pm, et |
None | Important. $29 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates. |
| Fed “Beige Book” | Thursday, July 29, 2:00 pm, et |
None | Important. This Fed report details current economic conditions across the US. Signs of weakness may lead to lower rates. |
| Q2 Advance GDP | Friday, July 30, 8:30 am, et |
Up 2.5% | Very important. The aggregate measure of US economic production. Weakness may lead to lower rates. |
| Q2 Employment Cost Index | Friday, July 30, 8:30 am, et |
Up 0.5% | Very important. A measure of wage inflation. Weakness may lead to lower rates. |
| U of Michigan Consumer Sentiment | Friday, July 30, 10:00 am, et |
66.2 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
FED “BEIGE BOOK”
The Fed “Beige Book” is a summary of economic conditions from each of the 12 Federal Reserve regional districts. The release takes place eight times a year approximately two weeks ahead of each of the Federal Open Market Committee meetings. The report is used at the FOMC meetings, which tends to be one of the most influential events in the market.
Market participants are continually attempting to determine what FOMC interest rate policy will be ahead of the next meeting. Any deviation from expectations usually results in extreme short-term market volatility. The timing of the “Beige Book” provides analysts a valuable look at one of the many factors the FOMC consider.
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.
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.
Mortgages Can Help
Mortgages Can Help, Rather than Hinder, Finances
By Dan Serra
RISMEDIA, June 28, 2010–(MCT)–While most financial-savvy consumers do their best to avoid debt, one debt that is unavoidable to many families is a mortgage. Because many of us feel more in control of our home and expenses without a mortgage, a common question is whether to pay it off as quickly as possible.
The answer depends on each person’s financial situation. A mortgage can actually be a blessing to some.
For example, mortgage interest is tax-deductible. This deduction saves taxpayers about $103 billion a year, according to the U.S. Treasury. The benefit is less to owners of low- to moderate-valued homes who may not have much interest or enough to claim it by itemizing deductions. But for families with a higher net worth, it allows a tax savings and may encourage them to buy larger homes.
With tax brackets for the wealthy rising next year, this tax break becomes more valuable. When the break is included, a 6 percent mortgage could have a rate closer to 4 percent in reality. Calculate your mortgage’s effective rate by subtracting your tax rate from 100 and multiplying that number by the interest rate. For example, a 28 percent tax bracket with a 6 percent mortgage would result in (.06 x 72) to equal the equivalent of a 4.32 percent mortgage rate after considering tax savings if itemized. That helps the interest look less daunting.
In addition, with the possibility of investing with a goal of a 5 or 6 percent return, instead of putting that money into a mortgage the homeowner could get a return higher than the effective rate, which could help grow net worth. On the other hand, if the effective rate is higher, it may make sense to pay down the mortgage.
Another situation that makes paying off a mortgage attractive is for someone at risk of bankruptcy. Many states offer protection from creditors seizing a home to pay debts. If a home is paid in full, it is more likely the owner could stay in it if he goes broke, providing he can pay for the upkeep.
Money taken out for a mortgage also could reduce net worth later in life. The potential for higher investment returns are gone; that money will not be able to grow if investments grow over the long term. Not to mention having too much invested in a house. That could be detrimental at retirement. While we can get a loan for a house, there are no loans to finance retirement.
(c) 2010, McClatchy-Tribune Information Services
Chico Market Update
MARKET COMMENT
Mortgage bond prices rose last week applying downward pressure on mortgage rates. Volatility in both the stock and bond markets remained high with broad swings occurring on a daily basis. Mortgage rates moved lower following the release of weak housing data. The improvements seen earlier in the week were reversed following a weak 5-year Treasury auction on Wednesday. The volatility seen this week is expected to continue until the future of the economy becomes clear.
Rates fell by about 3/8 of a discount point for the week.
Personal income and outlays will set the tone for trading this week. The employment report to be released on Friday will be the most important release this week. The focus lately has been on the payrolls component rather than the headline figure. If payrolls come in stronger than expected, mortgage interest rates may worsen.
LOOKING AHEAD
| Economic Indicator |
Release Date and Time |
Consensus Estimate |
Analysis |
| Personal Income and Outlays | Monday, June 28, 8:30 am, et |
Income up 0.5% Outlays up 0.1% |
Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates. |
| Consumer Confidence | Tuesday, June 29, 10:00 am, et |
62. | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
| ADP Employment | Wednesday, June 30, 8:30 am, et |
+56K | Important. An indication of the employment. Weakness in payrolls may bring lower rates. |
| Construction Spending | Thursday, July 1, 10:00 am, et |
-0.9% | Low importance. An indication of economic strength. Weakness may lead to lower rates. |
| ISM Index | Thursday, July 1, 10:00 am, et |
58.8 | Important. A measure of manufacturer sentiment. Weakness may lead to lower mortgage rates. |
| Employment | Friday, July 2, 8:30 am, et |
Jobs -70K Unemp @ 9.7% |
Very important. An increase in unemployment or weakness in payrolls may bring lower rates. |
| Factory Orders | Friday, July 2, 10:00 am, et |
-0.6% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
EMPLOYMENT
The employment report provides an abundance of information for almost every sector of the economy. Not only does the employment report give basic employment payroll statistics for the major working sectors, it also provides the average hourly earnings and the average workweek. Using this information provided by the Bureau of Labor Statistics (BLS) of the U.S. Department of Labor, economists estimate many other economic indicators such as industrial production, personal income, housing starts, and GDP monthly revisions. Since there is little data for economists to base their estimates on, the margin of error for the estimates tends to be high. As a result, the employment report can cause substantial market movements.
The BLS compiles data from two unrelated surveys that they conduct, the household survey and the establishment survey, in order to complete the employment report. This explains why sometimes there is an unexpected divergence between the unemployment rate and payrolls figures each month.
This week’s employment data will provide valuable insight into factors the Federal Open Market Committee will use to make future rate decisions. An employment rebound may prompt the Fed to raise short-term interest rates. However, if employment remains weak, then the Fed may seriously consider keeping rates low. Floating into this report is very risky without considerable gains Thursday afternoon heading into it.
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.
3073 Ceanothus Ave. in Chico, CA lowers price
What a great deal, this wonderful Hancock Park home is now only $314,00.