Posts Tagged ‘ Inflation ’

What’s Ahead For Mortgage Rates This Week : December 19, 2011

December 19, 2011
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Fed Funds RateMortgage markets improved last week, but by a slight amount only; not enough to move conventional mortgage rates in Washington State in any significant manner.

Wall Street watched as Eurozone leaders expressed little willingness to increase aid programs within the region, and as the Federal Reserve voted against new economic stimulus for the United States. The Fed Funds Rate remains near 0.000 percent and QE3 was not introduced.

Investors had expected the opposite outcome in both scenarios.

In most weeks, these stories would have led mortgage rates lower. There was, however, a fair amount of data suggesting that the U.S. economy is in recovery, and that tempered any major shifts in markets.

  • Manufacturing data proved to be strong
  • Inflation numbers are heating up
  • Jobless claims continue to drop, week-to-week

In addition, in its last meeting of the year, the Federal Reserve specifically mentioned that the economy has been “expanding moderately”.

These are all good signs for the future of the U.S. economy. Unfortunately, for mortgage rate shoppers and would-be home buyers, it may mean higher mortgage rates ahead.

Since early-November, mortgage rates have idled, moving within a range of less than 2 basis points and centered on 3.99%. According to Freddie Mac, this week’s average 30-year fixed rate mortgage fell to 3.94% which, at first glance, appears to be a “dip”.

To get access to that rate, however, requires more discount points as compared to prior weeks.

This week’s 3.94% with its accompanying 0.8 discount points is the financial equivalent of last week’s 3.99% with its accompanying 0.7 discount points. Going further, last week’s rates are actually less expensive to mortgage applicants for the first 3 years of a loan because the closing costs are so much lower.

So, given global economic conditions and the mortgage bond market’s status as a “safe market”, the failure of mortgage rates to fall suggests that this may be as low as mortgage rates get. It’s time to look at locking in.

This week is a holiday-shortened week. Markets will close early-Friday and volume is expected to be thin. Therefore, expect exaggerated movements in rates. There are 3 releases related to housing (Housing Starts, Existing Home Sales, New Home Sales) and a consumer sentiment release.

Top 25 Least Expensive U.S. Cities

June 28, 2011
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25 Least Expensive U.S. Cities

A report issued Monday by the U.S. government showed core inflation rising 2.5 percent in the last 12 months for its biggest one-year gain since January 2010.

Everyday living is becoming expensive, it seems.

But there are some U.S. towns in which the cost of living remains affordable — and downright cheap — as compared to the national average. They’re detailed in a BusinessWeek piece titled “The Cheapest 25 Cities In The U.S“.

In comparing costs across 340 urban areas as compiled by the Council of Community & Economic Research, cities in Texas, Arkansas, Tennessee and Oklahoma ranked consistently high. Cities in Hawaii did not.

Take note, though. Although the BusinessWeek piece highlights inexpensive cities in which to live, a low cost of living does not necessarily correlate to a high standard of living. Cost-leader Harlingen, Texas, for example, boasts a poverty rate nearly triple the national average.

Other “Inexpensive Cities” feature similar poverty rates.

The Top 10 “cheapest cities”, as shown by BusinessWeek are:

  1. Harlingen, Texas
  2. Pueblo, Colorado
  3. Pryor Creek, Oklahoma
  4. McAllen, Texas
  5. Cookeville, Tennessee
  6. Commerce-Hunt County, Texas
  7. Brownsville, Texas
  8. Fort Smith, Arkansas
  9. Muskogee, Oklahoma
  10. Springfield, Illinois

And, at the other end of the spectrum, the top 5 most expensive cities/areas were, in order, Manhattan, New York; Brooklyn, New York; Honolulu, Hawaii; San Francisco, CA; and Queens, New York.

Manhattan’s cost of living is more than twice the national average.

The complete list is available at the BusinessWeek website.

What’s Ahead For #Mortgage Rates This Week : June 27, 2011

June 27, 2011
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Fed Funds RateMortgage markets improved again last week on a revised economic outlook for the U.S. economy, and ongoing concerns about Greece and its sovereign debt.

Conforming mortgage rates in Washington State fell last week and now hover near the all-time lows set last November.

Adjustable-rate mortgages are especially low.

There were three big stories last week that will carry forward into this week.

First, the Federal Open Market Committee voted to leave the Fed Funds Rate unchanged in its current target range of 0.000-0.250 percent. This was expected. However, the Fed revised its growth estimates for the U.S. economy lower. This was not expected.

Mortgage rates dipped on the news.

Second, Greece moved closer to avoiding insolvency. The nation-state’s parliament must now pass a package of spending cuts and tax increases to appease Eurozone leaders and the IMF. Without passage, though, bankruptcy may be unavoidable.

Worries about Greece’s fate sparked a bond market flight-to-quality. This, too, helped mortgage rates ease.

And, lastly, Thursday, the U.S. and other members of the International Energy Agency chose to release 60 million barrels of oil to the market over the next month. You’ve likely experienced the impact as the gas pump already — gas prices are way down nationwide.

Lower gas prices means fewer inflationary pressures and inflation is the enemy of mortgage rates. Less inflation, lower mortgage rates.

This week, mortgage rates may reverse.

There isn’t much new data due for release — inflation data due Monday, housing data due Wednesday, and a series of confidence reports throughout the week — but there are 3 scheduled treasury auctions that could pull rates up or down.

  • Monday : 2-Year Treasury Note auction
  • Tuesday : 5-Year Treasury Note auction
  • Wednesday : 7-Year Treasury Note auction

If demand is high at any/all of the auctions, mortgage rates should drop. If demand is weak, mortgage rates should rise.

What’s Ahead For #Mortgage Rates : Week of June 20, 2011

June 20, 2011
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FOMC meets Tue-Wed this weekMortgage markets improved last week as Wall Street managed news on both sides of the economic coin. There were several instances of higher-than-expected inflation — an event that tends to lead rates higher — but weak domestic jobs data and a soft manufacturing report suppressed the damage.

Rates were also held low by ongoing issues in Greece.

In Greece, the government is currently struggling to meet its debt obligations — despite a restructuring of existing debt negotiated in 2010.

Without a plan for its new debt, though, Greece will likely to default on what it owes.  Eurozone and international banking leaders have failed to reach consensus on the situation, and now the citizens of Greece are in a state of social unrest.

The uncertainly surrounding the nation-state spurred a bond market flight-to-quality last week. That, too, helped to keep rates low.

Last week, mortgage rates fell for the sixth week out of nine, a streak that’s dropped conforming mortgage rates in Tumwater to their lowest levels of the year.

This week, that could change.

Wednesday, the Federal Open Market Committee adjourns from a 2-day meeting and anytime the Fed meets, there’s a good chance that mortgage rates will move. The FOMC makes the nation’s monetary policy.

The meeting adjourns at 12:30 PM ET and Fed Chairman Ben Bernanke will follow with a press conference at 2:15 PM ET. The press conference is meant to give context to the FOMC’s decision, and allow for back-and-forth with the press corps. Wall Street will watch closely, too, for signals of the Fed’s next action(s).

In addition, this week will see the results of May’s Existing Home Sales report and New Home Sales report. Both are considered important to the housing market, and to the economy overall.

If you’re still floating a mortgage rate, falling mortgage rates have helped you. There’s not much room for rates to fall further, however. Consider calling your loan officer and locking something in.

What’s Ahead For #Mortgage Rates This Week : June 13, 2011

June 13, 2011
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Housing Starts 2009-2011Mortgage markets moved in feverish fashion last week, changing with extreme frequency, and eventually ending slightly worse on the week. Conforming mortgage rates fell to a 6-month low Wednesday but, by Friday, they had retreated higher.

Last week marked just the second time in 8 weeks that rates in Tumwater increased. During that span, Freddie Mac reports that mortgage rates have dropped 42 basis points, or 0.42%.

That equates to a monthly savings of $25.24 per $100,000 borrowed.

One reason why mortgage rates have been dropping is that the economy is growing more slowly than projected. In a speech last week, Federal Reserve Chairman Ben Bernanke described the U.S. recovery as “frustratingly slow”. In a separate speech, another Federal Reserve President, William Dudley, categorized the recovery as “subpar”.

Economic weakness tends to promote a low mortgage rate environment as equity markets sell off and investors seek safety of principal. Indeed, the Dow Jones Industrial Average fell for the 6th straight week, its longest losing streak since 2002.

Mortgage rates were also helped by ongoing uncertainty in Greece. The nation remains at-risk for default, and that’s spurring a bond market to flight-to-quality which benefits the U.S. mortgage market, too.

This week, mortgage rates may reverse their recent slide. There isn’t much data due for release, but the numbers that will hit the wires have the ability to move markets — especially the inflation-linked figures.

  • Tuesday : Producer Price Index, Retail Sales
  • Wednesday : Consumer Price Index
  • Thursday : Housing Starts
  • Friday : Consumer Sentiment

If you’ve been looking at mortgage rates for a purchase or refinance, now may be a good time to lock. FHA and conforming rates are at their lowest levels since December 2010.

Going forward, rates have much more room to rise than to fall.

Fed Minutes Put The Heat On #Mortgage Rates To Rise

May 19, 2011
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FOMC Meeting MinutesThe Federal Reserve released its April 2011 Federal Open Market Committee meeting minutes Wednesday. In the hours since, mortgage markets have worsened; rates in Washington State are higher by 1/8 percent this morning, at least.

The “Fed Minutes” is published 8 times annually, three week after each scheduled FOMC meeting. The minutes are the Federal Reserve’s official recap of the conversations and debates that shaped the prior FOMC session.

Another way to consider the Fed Minutes is as the companion piece to the more well-known FOMC press release. The press release is issued on the day of adjournment, and is brief, narrow, and high-level. The statement makes broad comments on the economy and outlines new monetary policy.

By contrast, the Fed Minutes is delayed, lengthy, and rife with details. The minutes highlights arguments and discussion points between Fed members, and digs deep into underlying economic issues.

The FOMC press release is measured in paragraphs. The Fed Minutes is measured in pages.

Here is some of what the Fed discussed last month:

  • On inflation : Higher levels are “transitory”; will level-off with commodity prices
  • On housing : The market remains depressed. “Vacant properties” are harming construction.
  • On stimulus : The Fed will stick to its $600 billion support plan

In addition, at its meeting, the Federal Reserve discussed an exit strategy for its market support. The details are undecided, but the debate shows that the Fed is anticipated a change in policy sometime soon.

Wall Street estimates that a gradual economic tightening will begin within 12 months.

Mortgage rates have been fading since mid-April. The Fed Minutes may be the catalyst of a reversal. The Federal Reserve expects growth in the U.S. economy and growth tends to boost stock markets at the expense of bonds.

As bond markets fall, mortgage rates in Olympia rise.

Currently, Freddie Mac reports the average 30-year fixed mortgage rate as 4.63% — the lowest of the year.

Job Growth Returning To “Normal” Levels — A Bad Sign For Mortgage Rates

May 5, 2011
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Job Growth (2000-2011)

Be prepared for Friday morning. Mortgage rates and home affordability could worsen quickly. At 8:30 AM ET, the Bureau of Labor Statistics releases its April Non-Farm Payrolls report and momentum has been strong.

The monthly jobs report is a market-mover and analysts expect that 196,000 new jobs were added last month. If those expectations are exceeded — by even a little — Wall Street would take it mean “economic strength” and the stock market would be boosted.

Too bad for rate shoppers, though; a move like that would also lead to higher mortgage rates throughout Washington State. This is because, coming out of a recession, reports of economic strength tend to push mortgage rates up. We’ve seen it happen multiple times in the last 8 months.

Since losing more than 7 million jobs between 2008 and 2009, employers have added 1.3 million jobs back to the economy. And we’re learning that there’s plans for fewer job cuts in the future. It’s clear that the jobs market is improving and this is why tomorrow’s Non-Farm Payrolls report is so important.

A “weak economy” helped keep mortgage rates low for a very long time. A strengthening economy will reverse that tide.

So, consider your personal risk tolerance today, in advance of tomorrow’s Non-Farm Payrolls report. If the thought of rising mortgage rates makes you nervous, call your loan officer and lock in a rate today. Once tomorrow’s data is released, after all, the market might look changed.

What’s Ahead For #Mortgage Rates This Week : April 18, 2011

April 18, 2011
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Gas prices rising, mortgage rates rising, tooMortgage markets improved last week, buoyed by two days of out-sized gains. Mortgage rates bounced off their 8-week highs on much weaker-than-expected inflation data, and debt concerns abroad.

It’s an abrupt change in mortgage rate momentum.

Since the Federal Reserve’s March 2011 meeting, in which the Fed said rising energy costs are “putting upward pressure on inflation“, inflation chatter has figured big for Lacey  mortgage rates. With each tick higher in gas prices; in every conversation on U.S. debt load; as fruits and vegetables get more expensive at the supermarket, Wall Street’s fears of inflation have grown, and rate shoppers have suffered.

The connection between inflation and mortgage rates is straight-forward. Inflation is the devaluation of the U.S. dollar — the currency in which mortgage bonds are denominated. As the dollar loses values, so do mortgage bonds, therefore, leading mortgage rates to rise, inevitably.

Leading up to last week, concerns peaked and rates did, too. And then, a strange thing happened. The government’s March inflation report showed inflation well under control.

The results surprised Wall Street and the trades that had previously served to pump rate up, last week, ran in reverse.

The biggest gains were made Friday.

This week, inflation takes back-seat to housing data. There’s a lot of it coming.

  • Monday : Homebuilder Confidence Index
  • Tuesday : Housing Starts and Building Permits
  • Wednesday : Existing Home Sales
  • Thursday : Housing Market Index

There’s no data due Friday with markets closed for Good Friday.

This is a holiday-shortened week so expect low trading volume to render rates more erratic than typical. If you’re not yet locked in to a mortgage rate with your lender, consider doing it this week.

Inflation Pressures Mounting; Mortgage #Rates Rising

April 14, 2011
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Consumer Price Index (March 2009 - February 2011)Inflation pressures are mounting in the United States. And, Friday, the Consumer Price Index should prove it.

More commonly called “The Cost of Living Index”, CPI measures cost changes in the typical items bought by American households. Among others, CPI measures goods and service in apparel and recreation; medical care and education; and housing and transportation.

The March CPI data is expected to show an increase in the cost of living for the 17th straight month — a reading that would take CPI to an all-time high.

If you’ve filled your gas tank, sent a child to school, or shopped for groceries, you’re likely not surprised. Household budgets have been squeezed from all angles lately. The dollar’s purchasing power is waning.

This is inflation, defined. And a weaker U.S. dollar is bad for mortgage rates.

The connection between the U.S. dollar and mortgage rates is direct. When inflation pressures rise, mortgage rates in Lacey tend to rise, too, because mortgage rates are based on the price of mortgage-backed bonds — a security bought, sold and paid in U.S. dollars

Inflation, in other words, renders mortgage bonds less valuable to investors, all things equal, so investors sell them as inflation pressures grow. More sellers leads to lower prices which, in turn, causes mortgage rates to rise.

It’s why March’s Cost of Living data is so important to rate shoppers and home buyers in Thurston County. Higher levels of CPI can harm home affordability, and stretch your household budget uncomfortably.

As Memorial Day approaches, gas prices are projected to spike, offering little relief from the inflationary pressures in the economy. It’s one reason why mortgage rates should trend higher over the next few months.

If you’re wondering whether to lock or float your mortgage rate, consider locking in. At least today’s rates are a sure thing. Tomorrow’s rates could be much higher.

What’s Ahead For Mortgage Rates This Week : April 11, 2011

April 11, 2011
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Inflation squeezes mortgage ratesMortgage markets worsened last week as energy costs remained high, and jobs data looked strong. The safe haven buying that characterized the March mortgage market has subsided.

it’s driving mortgage rates higher across Washington State.

Conforming and FHA mortgage rates rolled back 8 weeks worth of improvements last week and are now back to mid-February levels. The rise in rates is hurting refinance activity and home affordability.

The biggest story from last week figures to carry forward into this one — the Federal Reserve’s take on inflation.

In the minutes from its March meeting, the FOMC was shown to have discussed the possibility of raising the Fed Funds Rate ahead of schedule, and to be watching near-inflation closely. Both developments are in response to a growing economy with rising price pressures.

Mortgage rate shoppers should take note.

Inflation is a mortgage-rate killer. When inflation is present in the economy, all things equal, mortgage rates rise. Sometimes by a lot. And, usually, just the expectation of inflation is all it takes to make mortgage rates jump.

That’s what we saw last week.

This week, keep a close watch on new inflation-related data set for release. This includes Tuesday’s Retail Sales data, Wednesday’s Producer Price Index, and Thursday’s Consumer Price Index. Each release can potentially move mortgage rates although, if recent trends are an indication, expect for rates to rise.

Mortgage rates in Olympia remain historically low. If you’re shopping for a mortgage, consider locking as soon as you can.