Market Update 10/24-10/28

Below is this week’s market update.  Rates ended level with how they started last week, despite some ups and downs.  Looks like this week we will be watching stocks and Europe for guidance on where rates will go until Friday’s flurry of reports.

Feel free to call me anytime with questions or if there is anything I can do to help!

Market Comment

Mortgage bond prices ended last week near unchanged, which kept mortgage interest rates relatively in check. Trading was choppy with some rate improvements Tuesday, which unfortunately were erased Wednesday and Thursday. Stock strength made it difficult for mortgage bonds to gain any traction. Higher than expected producer price, housing starts, and Philadelphia Fed data also made it difficult for rates to improve.

The employment cost index and PCE core inflation data will be the most important releases this week. The Treasury auctions will be followed closely. If foreign demand falters it could carry over to mortgage backed securities.

LOOKING AHEAD

Economic Indicator	Release Date & Time	Consensus Estimate	Analysis
Consumer Confidence	Tuesday, Oct. 25, 10:00 am, et	46	Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
Treasury Auctions Begin	Tuesday, Oct. 25, 1:15 pm, et	None	Important. 2Y Notes on Tuesday, 5Y Notes on Wednesday, and 7Y Notes on Thursday.
Durable Goods Orders	Wednesday, Oct. 26,  8:30 am, et	Down 0.2%	Important. An indication of the demand for "big ticket" items. Weakness may lead to lower rates.
New Home Sales	Wednesday, Oct. 26,  10:00 am, et	287k	Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.
Weekly Jobless Claims	Thursday, Oct. 27, 8:30 am, et	401k	Important. An indication of employment. Higher claims may result in lower rates.
Q3 Advance GDP	Thursday, Oct. 27, 8:30 am, et	Up 1.2%	Very important. The aggregate measure of US economic production. Weakness may lead to lower rates.
Personal Income and Outlays	Friday, Oct. 28, 8:30 am, et	Unchanged, Up 0.1%	Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates.
PCE Core Inflation	Friday, Oct. 28, 8:30 am, et	Up 0.1%	Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve.
Q3 Employment Cost Index	Friday, Oct. 28, 8:30 am, et	Up 0.4%	Very important. A measure of wage inflation. Weakness may lead to lower rates.
U of Michigan Consumer Sentiment	Friday, Oct. 28, 10:00 am, et	57	Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Employment Cost Index

The employment cost index is a quarterly report issued by the Department of Labor. The report measures the growth of wages, salaries, and benefits costs over a certain period of time. Though ECI figures are usually weeks old, the data remains the best indicator of employment price pressures considering it factors employees’ total compensation.

If wage pressures become evident, higher expectations of inflation also tend to arise. However, increasing compensation does not necessarily lead to increased inflationary pressures. Oftentimes, increased productivity enables employers to increase compensation without increasing the costs of their goods or services. Be cautious heading into this release.

Market Update 09/12-09/16

Here is this week's market update.  Rates are still VERY low, so it could be a great time to consider a refinance.  Some hot points first:

• Many lenders are capping the adjustments that can be made on any given rate.  That means the spread between owner occupied and investment properties is MUCH smaller.  This gives a great opportunity to fix a low rate for your rental
• Low or no equity in your home?  Might not be a problem!  We can still potentially lend up to 125% of your home's value if your loan is backed by Fannie Mae or Freddie Mac
• I can still close quickly, so if you or someone you know is buying a home and the lender hasn't offered a free float down in the past 2 weeks, give me a call!

Without further ado:

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 & 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. Weakness 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. Weaker figures 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.

Data

The abundance of fundamental data this week provides a good opportunity for mortgages to improve.  If the data shows weakness in the economy with little or no inflationary pressures then it is possible for mortgage bonds to rally.  However, if the data shows that the economy is rebounding any significant signs of inflation, mortgage bonds may fall pushing mortgage interest rates higher.


Feel free to call me with any questions!

Market Update for 9/6-9/9

Sorry it has been so long since I posted one of these, will try to do a better job of it in the future...

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 & 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.

Market Forecast for the week of 7/25-7/30

Here is this week's market update.  There is a lot of potential for volatility this week, on top of the already precarious US Debt Ceiling issue.

Mortgage bond prices fell last week, which pushed mortgage interest rates slightly higher.  Rates started off on a bad note Tuesday following stock strength and higher than expected housing starts data.  Things rebounded a bit Wednesday as European debt concerns dominated the headlines.  News that France and Germany reached an agreement Thursday on Greece sent the financial mortgage bond market downward.  We saw some negative movements the end of the week tied to significantly stronger stocks.  Mortgage bonds ended the week worse by about 1/4 of a discount point.

The Treasury will auction 2Y notes on Tuesday, 5Y notes on Wednesday, and 7Y notes on Thursday.  Traders will focus on foreign demand.


LOOKING AHEAD

Economic Indicator	Release Date & Time	Consensus Estimate	Analysis
Consumer Confidence	Tuesday, July 26, 10:00 am, et	58.1	Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
New Home Sales	Tuesday, July 26, 10:00 am, et	288k	Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.
Durable Goods Orders	Wednesday, July 27, 8:30 am, et	Up 1.2%	Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates.
Fed “Beige Book”	Wednesday, July 27, 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, July 28, 8:30 am, et	415k	Important. An indication of employment. Higher claims may result in lower rates.
Q2 Advance GDP	Friday, July 29, 8:30 am, et	Up 1.8%	Very important. The aggregate measure of US economic production. Weakness may lead to lower rates.
Q2 Employment Cost Index	Friday, July 29, 8:30 am, et	Up 0.7%	Very important. A measure of wage inflation. Weakness may lead to lower rates.
U of Michigan Consumer Sentiment	Friday, July 29, 10:00 am, et	63.5	Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

New Home Sales

New Home Sales data is compiled monthly by the Department of Commerce’s Census Bureau and is gathered from builders throughout the country. The data represents new home sales for the nation as well as four areas of the country: the Northeast, the Midwest, the South, and the West. Information on the average price of a home, the number of homes for sale, and the supply of unsold homes are also provided. The data is an important indicator because it shows any strength or weakness in the housing sector. The housing sector data is valuable because when consumer spending changes, it appears in this sector first. Consequently, a chain reaction typically occurs.  A slowdown in new home sales tends to lead to a slowdown in housing starts, which will continue to affect other indicators possibly continuing the recession, as has been the recent concern of most everyone


New Home Sales data is often volatile and difficult to predict.  Most analysts look at a three-month average in order to see any trends in the growth rate.  Surges in the release are often greeted with little more than an average reaction in the bond market.  However, the data remains significant in showing the condition of the housing sector of the economy.  The housing sector as of late has been a major disappointment but the Fed hopes the low interest rate environment will help.

Market Forecast for the week of 7/11

After taking a beating for most of last week, rates came back much stronger on Friday, and we are seeing continued gains today.  The big movers this week look to be the auctions taking place tomorrow, Wednesday and Thursday, and with the growing debt concerns in the EU we will hopefully see some good foreign demand.

As always, please call me with any questions!

Market Comment

Mortgage bond prices rebounded last week, which helped mortgage interest rates improve. Weaker than expected data resulted in positive rate movements. Factory orders and the employment report both failed to meet expectations. Factory orders rose 0.8% in contrast to the expected 1.0% increase. Unemployment came in at 9.2%, higher than the expected 9.1% mark. Payrolls increased 18k, considerably weaker than the expected 110k increase. Mortgage bonds ended the week better by about 5/8 of a discount point.

The Treasury will auction 3Y notes on Tuesday, 10Y notes on Wednesday, and 30Y bonds on Thursday. If foreign demand falters rates may come under pressure.

LOOKING AHEAD

Economic Indicator	Release Date & Time	Consensus Estimate	Analysis
Trade Data	Tuesday, July 12, 8:30 am, et	$43b deficit	Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
Fed Minutes	Wednesday, July 13, 2:00 pm, et	None	Important. Details of the last Fed meeting will be thoroughly analyzed.
Weekly Jobless Claims	Thursday, July 14, 8:30 am, et	420k	Important. An indication of employment. Higher claims may result in lower rates.
Retail Sales	Thursday, July 14, 8:30 am, et	Down 0.1%	Important. A measure of consumer demand. Weakness may lead to lower mortgage rates.
Producer Price Index	Thursday, July 14, 8:30 am, et	Up 0.2%, Core up 0.2%	Important. An indication of inflationary pressures at the producer level. Lower figures may lead to lower rates.
Consumer Price Index	Friday, July 15, 8:30 am, et	Up 0.2%, Core up 0.3%	Important. A measure of inflation at the consumer level. Lower than expected increases may lead to lower rates.
Industrial Production	Friday, July 15, 9:15 am, et	Up 0.2%	Important. A measure of manufacturing sector strength. A lower than expected increase may lead to lower rates.
Capacity Utilization	Friday, July 15, 9:15 am, et	76.8%	Important. A figure above 85% is viewed as inflationary. Weakness may lead to lower rates.
U of Michigan Consumer Sentiment	Friday, July 15, 10:00 am, et	71.8	Important. An indication of consumers’ willingness to spend. Weakness may lead to lower rates.

Jobs and the Economy

Our economy in the US is driven by consumer spending, which accounts for almost 70% of Gross Domestic Product (GDP). Three driving forces, high unemployment, high commodity costs, and a depressed housing market are currently hampering consumer spending and thus keeping the recession intact.

It is simple; a person without a job can’t spend money because they don’t have any. High food and energy costs, items that must be purchased to keep a household running, saps money that could be used for other "luxury" items like TV’s and cars. Lastly, many households relied on home equity to enhance lifestyles, pay for college, or make major improvements to the house.

The only way for the US to reduce our budget deficits and grow GDP is to get people back to work. We have a long way to go as the employment report showed last week. 

Mortgage Inquiries and Your Credit Score

The excellent Credit Sesame puts together a concise answer to one of the most frequent questions I get asked: "Will running my credit hurt my score?".  The short answer is "no", as outlined below:

1. Inquiries are all specifically coded by the credit bureaus to reflect the industry from which they came. That means if you apply for a mortgage, auto loan, credit card, personal loan, student loan, or any other type of loan the inquiry will likely clearly indicate the specific type of credit you’ve applied for. This is important because the type of inquiry plays a key role in how it’s evaluated.

2. Mortgage, auto and student loan inquiries are treated differently from all other inquiry types. If you don’t already know, these are the types of loan where you can shop around for the best interest rates and terms. As such, searching for any one of these loans can result on many lenders pulling your credit reports and scores. As such, your credit reports could get loaded up with multiple credit inquiries in a very short period of time because of your rate shopping activities.

3. FICO doesn’t want to penalize smart consumers for rate shopping, which is something we all should do when looking for funding for major purchases, like mortgages.  So, rather than assume each inquiry indicates a discreet and unique credit application, they built logic in their credit scoring model that identifies when you’re shopping for one loan rather than many loans.

Here’s how it works:

Mortgage related inquiries, which are very easy to identify because of #1 above, are ignored for the first 30 days they’re on your credit reports. So, if you apply for a mortgage loan on Jan 15^th it’ll take until Feb 15^th for that inquiry to become “visible” to the FICO score. That means you can apply for mortgage loans with 100 different lenders over a 30-day period and all 100 of those inquiries will be ignored.  That means they’ll have absolutely no impact on your FICO scores.

They go on to say that even if you go up to 45 days between the initial mortgage credit inquiry and the final inquiry, the bureaus will only count them as 1 inquiry instead of ignoring them altogether.  

If you have any other questions about credit or lending, please feel fee to contact me anytime!

June Market Trends for Portland Area

Here are this month's market trends for the Portland Area.  We are currently working on getting more areas represented, so expect those to come soon