Friday, April 25, 2014

Big Week Ahead

Mortgage Time
Mortgage Market News for the week ending April 25, 2014


Big Week Ahead
The last two weeks have been relatively light ones for economic news. Mortgage rates moved a little higher late last week ahead of Easter weekend, and they reversed that increase during this week. Headlines from Ukraine added a short burst of volatility but had little lasting impact.
Overall, the economic data released this month has been better than expected. After slowing due to unusually severe winter weather, most sectors of the economy appear to be picking up. The economy added jobs at a healthy pace. Retail Sales and manufacturing posted solid gains. This week, Consumer Sentiment jumped to the highest level since July of last year.

Despite the good results this month, however, investors require more evidence that the improvement is sustainable before they will raise their long-term outlook for economic growth. The steady economic outlook over the last several months has helped keep mortgage rates in a fairly narrow range.
One sector which has lagged in its pace of improvement is housing. March Existing Home Sales were roughly the same level as February, which was very close to the consensus forecast. A tight supply of inventory in many regions was one factor holding back sales. Offering potential for future activity, the total inventory of existing homes available for sale rose 5% in March. March New Home Sales showed a sharp drop from February, but this data is extremely volatile month to month.



Friday, April 18, 2014

Reversal for Stocks and Bonds

Mortgage Time
Mortgage Market News for the week ending April 17, 2014


Reversal for Stocks and Bonds
Last week, stocks posted large losses and mortgage rates improved, as investors grew more concerned about the strength of the economy. The reverse took place this week. Better economic data and comments from Fed Chair Yellen boosted stocks and caused mortgage rates to end the week higher.
The economic data released this week was generally better than expected. The biggest report, March Retail Sales, rose 1.1% from February, which was the largest monthly increase since September 2012. Industrial Production, another important indicator of economic activity, showed a comparable increase. Weekly Jobless Claims held steady near the lowest levels since 2007. The Philly Fed manufacturing index jumped to the highest level since July of last year. Stronger growth is good for the economy, but it increases expectations for future inflation, which is negative for mortgage rates.
Dovish comments from Fed Chair Yellen on Wednesday suggested that the Fed is not in a rush to raise the fed funds rate. Yellen explained that the timing of rate hikes will depend on when the economy meets the Fed's goals for the labor market and inflation. According to Yellen, a great deal of slack remains in the labor market, and this calls for accommodative monetary policy. Because loose policy boosts economic growth, Yellen's comments were viewed as positive for the stock market, and investors shifted assets from bonds to stocks.

Davis Orebaugh
Mortgage Consultant
NMLS #:   / NC 323545
OnQ Logo large.jpgNMLS # 5645
2501 Blue Ridge Road, Suite 370
Raleigh, NC 27607
Phone:  919.926.7554 Cell:  919.740.7049 Direct Fax:  919.590.1767

Friday, April 11, 2014

Shift from Stocks to Bonds

Mortgage Time
Mortgage Market News for the week ending April 11, 2014

Shift from Stocks to Bonds
The stock market was the biggest influence on mortgage rates this week, as investors shifted assets from stocks to bonds. The Fed Minutes also were favorable for mortgage rates, and rates ended the week lower, near the lowest levels of the year.
Beginning with the Jobs report last week, investors became more bearish about the stock market, and investors grew more concerned this week that upcoming earnings releases will be weak. As a result, investors have reduced their positions in stocks, causing the Dow stock index to fall over 500 points from last week's record high. Some of the proceeds from the stock sales were used to purchase bonds, including mortgage-backed securities (MBS). MBS prices increased from the added demand, leading to an improvement in mortgage rates.
Wednesday's release of the FOMC Minutes from the March 19 Fed meeting also helped mortgage rates. In the Minutes, some Fed officials expressed concern that inflation would remain below the Fed's target level of 2.0% for years. While this may be bad from the Fed's point of view, low inflation is positive for mortgage rates.


Davis Orebaugh
Mortgage Consultant
NMLS #:   / NC 323545
OnQ Logo large.jpgNMLS # 5645
2501 Blue Ridge Road, Suite 370
Raleigh, NC 27607
Phone:  919.926.7554 Cell:  919.740.7049 Direct Fax:  919.590.1767

Friday, April 4, 2014

Job Gains on Target

Mortgage Time
Mortgage Market News for the week ending April 4, 2014

  
 
Job Gains on Target
This week, all eyes were on Friday's key monthly Employment report. Adding to the focus, Fed Chair Janet Yellen emphasized on Monday that future Fed policy will primarily be determined by the performance of the labor market. The jobs data was right in line with expectations, and mortgage rates ended the week a little lower.
After a rough start to the year, partly due to unusually severe winter weather, job growth has returned to the levels expected by most economists and the Fed. The economy added 192K jobs in March, and upward revisions to the data from the prior two months added another 37K jobs. Anticipating even stronger data, which would be more inflationary, investors had pushed mortgage rates a little higher earlier in the week. After the report was released, mortgage rates completely reversed those increases.
The biggest surprise in the jobs data may have been the surge in the labor force. The Unemployment Rate remained unchanged at 6.7%, above the consensus of 6.6%, but the flat reading was due to an unexpectedly large number of people entering the labor force. The Unemployment Rate measures the percentage of people who want a job but are unable to find one. Growth in the labor force is a sign of an improving labor market.

Davis Orebaugh
Mortgage Consultant
NMLS #:   / NC 323545
OnQ Logo large.jpgNMLS # 5645
2501 Blue Ridge Road, Suite 370
Raleigh, NC 27607
Phone:  919.926.7554 Cell:  919.740.7049 Direct Fax:  919.590.1767

Friday, March 28, 2014

Future inflation

Mortgage Time
Mortgage Market News for the week ending March 28, 2014
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Future Inflation
It was a very quiet week for mortgage rates. There were few surprises in the economic data. Talk of easing by the European Central Bank (ECB) was positive for US mortgage rates, helping rates end the week a little lower.
Mortgage rates are primarily set based on expectations for future inflation. The Fed has an inflation target of 2.0%. Most economists think that inflation rates well above or well below this level could have negative consequences for the economy. Recent readings for core inflation have been holding steady, below 2.0%. The Core PCE price index released this week revealed that core inflation was just 1.1% over the past year. Last week's widely followed Core Consumer Price Index (CPI) showed an annual rate of 1.6%. The majority view on the Fed, though, is that inflation in the US will gradually climb due to an improving economy and a tighter labor market. To prevent inflation from rising too far, the Fed is on track to end its bond purchase program later this year, and Fed Chair Yellen has indicated that the first fed funds rate hike is expected to take place next year.
The situation in Europe is very different. The economic recovery has been much weaker there. Recent inflation readings have been low and appear to be heading even lower. Traditionally, the ECB is known as a stricter inflation fighter than the Fed, meaning that it is more reluctant to add stimulus. Given current economic conditions, though, officials across the euro zone have suggested that the ECB may cut rates or begin to buy bonds to help stimulate the economy and increase inflation. Increased expectations for additional ECB stimulus helped push bond yields lower around the world, including US mortgage-backed securities (MBS).

Davis Orebaugh
Mortgage Consultant
NMLS #:   / NC 323545
OnQ Logo large.jpgNMLS # 5645
2501 Blue Ridge Road, Suite 370
Raleigh, NC 27607
Phone:  919.926.7554 Cell:  919.740.7049 Direct Fax:  919.590.1767

Friday, March 14, 2014

Ukraine and China

Mortgage Time
Mortgage Market News for the week ending March 14, 2014

Ukraine and China
Tensions in Ukraine flared up again this week, causing investors to shift assets from stocks to the relative safety of bonds. Weaker than expected economic data in China also favored bonds over stocks, while the US economic data was roughly neutral. As a result, mortgage rates ended the week lower.
The most significant US economic report released this week, Retail Sales, contained some good news and some bad news. On the positive side, the results for February were stronger than expected. Unfortunately, the figures for January were revised lower. Overall, this left the data over the two-month period a little weaker than expected. Given the offsetting effects of the solid headline number and the downward revisions, combined with weather related distortions, the report caused no change in the economic outlook and had little impact on mortgage rates.
There was a lot of talk in the mortgage industry this week about a proposal out of the Senate Banking Committee that would replace Fannie Mae and Freddie Mac. Together Fannie and Freddie purchase or insure the majority of fixed-rate mortgages, so any changes to their structure would have enormous implications for mortgage lending. In the proposal, a new government entity would take over many of the functions of Fannie and Freddie, while some of the default risk would be shifted to private insurers. Both political parties support a reduction in the risk to taxpayers, but beyond that opinions vary widely about the appropriate role of government in the housing market. As a result, this proposal is viewed as a starting point for a long political debate, and the implementation of major reform of Fannie and Freddie is projected by most experts to be many years away.

Davis Orebaugh
Mortgage Consultant
NMLS #:   / NC 323545
OnQ Logo large.jpgNMLS # 5645
2501 Blue Ridge Road, Suite 370
Raleigh, NC 27607
Phone:  919.926.7554 Cell:  919.740.7049 Direct Fax:  919.590.1767

Friday, March 7, 2014

Jobs Data and Ukraine

Mortgage Time
Mortgage Market News for the week ending March 7, 2014


Jobs Data and Ukraine
It was a volatile week in mortgage markets. Early in the week, rapidly changing conditions in Ukraine caused a great deal of movement in mortgage rates, but there was little net impact. Later in the week, stronger than expected labor market data was negative for mortgage rates, and rates ended the week higher.
Against a consensus forecast of 140K, the economy added 175K jobs in February, and the figures for the prior two months were revised a little higher. This took place, according to the Bureau of Labor Statistics, despite the largest weather related disruption since 1996. The Unemployment Rate unexpectedly rose from 6.6% to 6.7%, but this was due to an increase in the number of people that entered the labor force. The solid jobs report exceeded expectations nearly across the board. Since stronger economic growth raises future inflationary pressures, this was unfavorable news for mortgage rates.
After Russia moved troops into Ukraine, the threat of an escalating conflict caused a "flight to safety" in financial markets on Monday. This involved a shift by investors to relatively safer assets, resulting in a large decline in stocks and significant improvement in bonds, including mortgage-backed securities (MBS). A complete reversal took place on Tuesday, however, after the Russian President said that Russia would not use military force in Ukraine.

Davis Orebaugh
Mortgage Consultant
NMLS #:   / NC 323545
OnQ Logo large.jpgNMLS # 5645
2501 Blue Ridge Road, Suite 370
Raleigh, NC 27607
Phone:  919.926.7554 Cell:  919.740.7049 Direct Fax:  919.590.1767