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Mortgage Markets worsened Last Week

June 1, 2010

Mortgage markets worsened last week as concerned of a global debt crisis lessened and stock markets rebounded. The gains in stocks came at the expense of bonds — including mortgage bonds.

Conforming and FHA mortgage rates rose in Washington State for the first time in 5 weeks, pulling mortgage pricing off its best levels of the year.

The best mortgage rates of last week were locked Tuesday morning.

This week, mortgage rates may rise even more. In addition to the release of May’s jobs report and consumer confidence data, fears of broader economic slowdown appear to be easing.

Day-by-day, the chances of rates rising are real.

On Tuesday, a consumer confidence survey is released. Consumer confidence is linked to economic growth because 70 percent of the economy is based in consumer spending. In theory, as consumer confidence grows, the economy should, too.

Therefore, a strong reading should push mortgage rates higher.

Then, on Wednesday, Pending Home Sales and Auto Sales data is released for last month. Both items are “big ticket” and, again, reflect on consumer confidence. Strong readings should be rough on rates.

Next, on Thursday, jobless claims data hits the wires along with worker productivity stats. Normally, these two releases don’t carry much weight, but with the jobs market in focus this year, markets will be watching for clues about Friday’s big report — the May Non-Farm Payrolls.

Anything can happen when the jobs report is released.

In April, an estimated 290,000 jobs were created and, in May, economists think more than a half-million people re-entered the workforce. This is good for the economy, of course, but can drag on mortgage rates. If job growth even comes close to the 500,000 marker, mortgage rates could zoom higher.

Mortgage rates moved higher last week but are still very low. If you’ve been thinking about refinancing your mortgage, you probably shouldn’t put it off much longer. Talk to your loan officer today — the longer you wait, the more that rates can rise.

Mortgage Market News for the week ending May 21, 2010

May 21, 2010

By William Tuning

Investors Shift to Safer Assets

This week, uncertainty about the pace of the economic recovery caused investors to shift to relatively safer assets, including government insured mortgage-backed securities (MBS). Also positive for mortgage markets, the economic data released this week showed that inflation remains extremely low. As a result, mortgage rates declined during the week, reaching the lowest levels of the year.

Concern about the level of global economic growth drove financial markets this week. Troubled European countries will be forced to reduce government spending, and Chinese officials indicated that they will tighten monetary policy to reduce inflation. In the US, it’s not clear to what degree the new financial regulation bill will cause banks to reduce lending, leading to slower economic growth. In response to periods of uncertainty such as this, investors seek to reduce risk by moving to safer assets such as bonds, and greater demand for MBS pushes mortgage rates lower.

This week’s news from the housing sector was mixed. April Housing Starts increased above the consensus forecast to the highest level since October 2008. Building Permits, a leading indicator, declined moderately. The May NAHB Homebuilder confidence index rose to the highest level since August 2007. Even with the end of the homebuyer tax credit, the builders surveyed remained optimistic about the next six months.

Also Notable:

April Core CPI inflation fell to the lowest level in 44 years
Weekly Jobless Claims unexpectedly jumped well above the consensus forecast
The Treasury will auction $113 billion in 2-yr, 5-yr, and 7-yrs next week
Oil prices fell as low as $65 per barrel, reaching the lowest level since July 2009

Average 30 yr fixed rate:
Last week:	-0.05%
This week:	-0.20%

Stocks (weekly):
Dow:	10,100	-500
NASDAQ:	2,225	-125

Week Ahead

Next week, a wide mix of economic data will shed some light on the level of economic growth. Existing Home Sales will be released on Monday, and New Home Sales will come out on Wednesday. Durable Orders, an important indicator of economic activity, will also be released on Wednesday. Thursday, a revised figure for first quarter Gross Domestic Product (GDP) will come out. The Chicago PMI manufacturing index and Personal Income are scheduled for Friday. Consumer Sentiment and Consumer Confidence will round out the Economic Calendar. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.

The Fed’s April Minutes Push Mortgage Rates Even Lower

May 20, 2010

By William Tuning

FOMC April 2010 Minutes

After starting the day in the red, mortgage rates rebounded Wednesday afternoon after the Federal Reserve released its April 27-28, 2010 meeting minutes.

It’s good news for home buyers and would-be refinancers in Lacey. Mortgage rates continue to troll along multi-year lows.

“Fed Minutes” are lengthy, detailed recaps of Federal Open Market Committee meetings, not unlike the minutes you’d see after a corporate conference, or condo association gathering. The Federal Reserve publishes Fed Minutes 3 weeks after each respective FOMC get-together.

The Fed meets 8 times annually.

Because of the minutes’ content and density, it’s of tremendous value to Wall Street and investors. Fed Minutes provide a glimpse into the conversations and debates that shape the country’s monetary policy.

The broad scope of the published meeting minutes are in sharp contrast to the more well-known, post-meeting press release which reads more like a policy summary.

And the extra words matter.

Here’s some of what the Fed discussed last month:

On Greece : A crisis in Greece could slow U.S. domestic growth
On housing : Despite government support, growth appears to have stalled
On its mortgage buyback program : There’s little reason to sell mortgage bonds right now

When the markets saw the Fed Minutes, what had been a down day for bond markets turned positive. The less-than-sunny outlook for the near-term U.S. economy sparked bond sales, pushing prices higher.

Mortgage rates move opposite mortgage bond prices.

Wall Street is always in search of clues from inside the Fed about what’s next for the economy and post-FOMC minutes usually give good fodder. April’s meeting was no different.

For now, mortgage rates remain near all-time lows but once the Eurozone issues are settled, rates are likely to rise. If you haven’t locked a mortgage rate, your window may be closing. Once the economy is turning around for certain, mortgage bonds will be among the first of the casualties.

Call CU Mortgage Division at (360) 539-4687 or visit www.williamatuning.com for additional mortgage related information.

Daily Rate Lock Recommendation – 05/17/2010

May 17, 2010

By William Tuning

Monday’s bond market has opened up slightly following a calm open in stocks. The major stock indexes were mixed today with many mortgage lenders changing their rate mid day today.
There is no relevant economic news scheduled for release today. As long as the stock markets remain near current levels, the bond market and mortgage rates will likely follow suit today. If they move much higher or lower than where they are this morning, bond prices will probably move in the opposite direction. If stocks rise, look for upward revisions to rates later today. If they fall form current levels, mortgage pricing may revise lower this afternoon.

The first report of the week is April’s Producer Price Index (PPI) early tomorrow morning, which helps us measure inflationary pressures at the producer level of the economy. If this report reveals weaker than expected read ings, indicating inflation is not a concern at the producer level, we should see the bond and stock markets rally. The overall index is expected to show an increase of 0.1%, while the core data that excludes more volatile food and energy prices is also expected to rise 0.1%. No change or a decline in the core data would be ideal for mortgage shoppers because inflation is the number one nemesis for long-term securities such as mortgage-related bonds.

April’s Housing Starts will also be posted early tomorrow morning, but is much less important than the PPI readings are. This data measures housing sector strength and mortgage credit demand by tracking new permits and actual starts of new home construction. It is expected to show an increase in new starts from March’s readings. Since this report is not considered to be of high importance to the bond market, it likely will have little impact on mortgage rates unless it varies greatly from forecasts and the PPI matche s forecasts.

Overall, it appears it is going to be another active week for the mortgage market. We have two inflation readings that are very important to the bond market the middle part of the week. Stock market volatility will likely also affect bond trading again this week, so we may see movement in rates several days. Wednesday’s CPI is the single most important report of the week, but tomorrow’s PPI can also heavily influence the bond market.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Lock if my closing was taking place between 8 and 20 days… Lock if my closing was taking place between 21 and 60 days… Lock if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

©Mortgage Commentary 2010

Mortgage Market News for the week ending May 14, 2010

May 14, 2010

By William Tuning

EU Announces Larger Aid Package

The biggest economic news this week was that the EU will provide a much larger aid package than previously announced. On Monday, this news caused investors to move funds to riskier assets and out of safer investments such as bonds. This week’s economic data contained few surprises. Later in the week, successful results for the long-term Treasury auctions helped bond markets, and mortgage rates ended the week near the lowest levels of the year.

Monday, the EU and the IMF surprised investors with the announcement that they will make available up to $1 trillion to support Greece and other EU members which are experiencing economic troubles. This enormous amount of aid demonstrates the commitment of the stronger European countries to maintaining the European Union and allowing the weaker countries time to recover. The Euro currency strengthened against the dollar and other currencies, and global stock markets rallied strongly. Mortgage markets were hurt by the news when investors reversed the flight to safety trade and moved funds back into riskier assets such as stocks.

March Pending Home Sales increased 5.3% from February, and were 21% higher than one year ago at this time. The Pending Home Sales index, which measure sales of existing homes based on contracts which have been signed but not yet closed, is a leading indicator for the housing sector. The index provides guidance for future Existing Home Sales reports. The chief economist of the National Association of Realtors (NAR) suggested that the home buyer tax credit has helped “stabilize the market”. Contracts had to be signed by the end of April to qualify for the tax credit, so many buyers rushed to take advantage before the deadline. As a result, the NAR chief economist expects “measurably lower sales” in May. The growth in housing sector activity will then depend largely on the performance of the economy and the labor market. The housing sector may also benefit from increased availability of jumbo mortgages and other forms of credit from non-governmental sources.

Also Notable:

April Retail Sales rose from March, the seventh straight monthly increase
The Fed’s Plosser said that the economic recovery is “on a sustainable path”
The monthly federal budget deficit jumped to a record high for the month of April
Gold prices rose to a new high above $1,200 per ounce

Average 30 yr fixed rate:
Last week:	-0.15%
This week:	-0.05%

Stocks (weekly):
Dow:	10,650	+250
NASDAQ:	2,350	+50

Week Ahead

The most significant economic data next week will be the monthly inflation reports. The Producer Price Index (PPI) focuses on the increase in prices of “intermediate” goods used by companies to produce finished products and will come out on Tuesday. The Consumer Price Index (CPI), the most closely watched monthly inflation report, will come out on Wednesday. CPI looks at the price change for those finished goods which are sold to consumers. In addition, the Housing Starts report is scheduled for Tuesday. The FOMC Minutes from the April 28 Fed meeting will be released on Wednesday. These detailed meeting notes often provide additional insight into the Fed’s decisions. Empire State, Leading Indicators, and Philly Fed will round out the week.

Call us at CU Mortgage Division for any information related to mortgage loans at (360) 539-4687 or visit our website at www.cumortgagedivision.com .

Mortgage Rates at Lowest Level of the Year

May 13, 2010

By William Tuning

Short-Term Rates Fall As Well

Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 4.93 percent with an average 0.7 point for the week ending May 13, 2010, down from last week when it averaged 5.00 percent. Last year at this time, the 30-year FRM averaged 4.86 percent. The 30-year FRM has not been lower since the week ending December 10, 2009, when it averaged 4.81 percent.

Click here to read the full release.

Daily Rate Lock Recommendation – 04/20/2010

April 20, 2010

By William Tuning

Tuesday’s bond market has opened down slightly with no relevant economic news on tap today and the stock markets in positive ground. The major stock indexes are showing gains with the Dow up 25 points and the Nasdaq up 12 points. The bond market is currently down 3/32, which will likely mean an increase of approximately .250 of a discount point in this morning’s mortgage rates. However, most of this increase is a result of yesterday’s late weakness in bonds and not of this morning’s minor loss.

There is no relevant data scheduled for release today or tomorrow. This likely leaves the bond market, and therefore mortgage rates, to the mercy of the stock markets. If the stock indexes rally again like they did late yesterday, we may see bonds fall and another afternoon increase in mortgage rates. But if they remain near current levels, mortgage rates should follow suit.

There are a couple of key names posting quarterly earnings after the markets cl ose today, including Apple. If they beat analysts’ forecasts, we will probably see stock rise tomorrow and bonds fall. If the corporate earnings fall short of expectations and the stock markets post losses tomorrow, bonds should benefit as investors seek safe-haven from the volatility. That would be good news for mortgage shoppers since it should lead to improvements in mortgage rates.

Thursday morning brings us the release of March’s Producer Price Index (PPI). It will give us an important measurement of inflationary pressures at the producer level of the economy. There are two portions of the report that analysts watch- the overall reading and the core data reading. The core data is more important to market participants because it excludes more volatile food and energy prices. If it shows rapidly rising prices, inflation fears may hurt bond prices since it erodes the value of a bond’s future fixed interest payments, leading to higher mortgage rates. However, a slight increase, or better yet a decline in prices, would be good news for the bond market and mortgage rates. Current forecasts are calling for a 0.5% increase in the overall reading and a 0.1% rise in the core data.

Also Thursday, the National Association of Realtors will post March’s Existing Homes Sales numbers. A similar report to this one and actually the week’s least important data- March’s New Home Sales will be released Friday morning. Both of these releases give us an indication of housing sector strength and mortgage credit demand, but unless they vary greatly from analysts’ forecasts, I don’t think they will cause much movement in mortgage rates. Both are expected to show increases from February’s levels.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 days… Float if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days. .. Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Daily Rate Lock Recommendation – 04/19/2010

April 19, 2010

By William Tuning

The bond market has slipped well into negative ground after the stock markets have moved well off earlier lows. The Dow is currently up 65 points after being down slightly earlier. The Nasdaq is still in negative ground but is close to the high of the day. The bond market is currently down 9/32, which will likely cause afternoon upward revisions to mortgage rates of approximately .125 – .250 of a discount point from this morning’s rates.

This week is moderately active in terms of economic news scheduled for release. There are five reports scheduled, but only two of them carry the potential to cause noticeable movement in mortgage rates. Accordingly, there is a decent possibility of seeing a relatively calm week in the mortgage market, assuming that the stock markets do the same.

The Conference Board, who is a New York-based business research group, gave us today’s only economic data. They reported t hat their Leading Economic Indicators (LEI) rose 1.4% last month, exceeding forecasts of a 1.0% increase. This means that the index is predicting rapid growth in economic activity over of the next several months, which can be considered negative news for the bond market and mortgage rates. However, since this data is considered to be only moderately important, its impact on this morning’s rates was fairly minimal.

There is no relevant data scheduled for release tomorrow or Wednesday. Look for the stock markets to heavily influence bond trading and mortgage pricing the next couple of days. If the major stock indexes rally, bonds could suffer and push mortgage rates higher. Thursday or Friday will likely end up being the most important day of the week with the Producer Price Index (PPI) and Durable Goods reports being released respectively.

If I were considering financing/refinancing a home, I would…. Lock if my closing was taking place within 7 da ys… Float if my closing was taking place between 8 and 20 days… Float if my closing was taking place between 21 and 60 days… Float if my closing was taking place over 60 days from now… This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Legal Disclaimer / Fine Print

January 24, 2007

By William Tuning

The content provided on this website or blog is presented or compiled for your convenience by William Tuning and is provided for informational purposes only. It does not necessarily represent the views or opinions of Network Funding LP.

Neither William Tuning nor Network Funding LP assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of any information disclosed, or represents that its use would not infringe privately owned rights.

The information provided on this website should not be construed as offering legal, financial or other advice to be relied on by the reader to make or refrain from making any decision or to take any action.

The investment, mortgage or financial services or strategies mentioned in and throughout this website may not be suitable for you.

Network Funding LP DBA CU Mortgage Division is an Equal Opportunity Lender.

William Tuning is a Licensed Mortgage Originator: MLO-68476.

Network Funding is a Licensed Mortgage Company: CL#2297 /NMLS#2297

CU Mortgage Division NMLS#65808 is a Branch of Network Funding LP – NMLS #2297