Important Information On The Week’s Mortgage Outlook

Written by guest contributor Al Beatrice, American Eagle Mortgage 239-370-1158 abeatrice@aemc.cc

Mortgage-Word-Cloud-1234208QUOTE FOR THE WEEK

“Nothing is ever enough when what you are looking for isn’t what you really want.”

― Arianna Stassinopoulos Huffington

 Market Comment

Mortgage bond prices were sharply lower which pushed rates higher last week. The financial markets experienced some of the greatest volatility of this year. Investors feared the Fed will reduce the stimulus spending, which has enabled stocks to hit record highs, and mortgage interest rates to test historic lows. If the Fed’s economic outlook is correct, asset purchases could end as soon as mid-2014. However, like Bernanke said continually, it is DATA DEPENDANT. Weaker data will help rates stay lower; however stronger data will spook the markets even more.

Investors placed their bets on “sooner” rather than “later” and unfortunately interest rates were worse by 1/2% in interest rate.

Fannie and Freddie bond yields have seen the biggest weekly surge in four years, and the days of rates below 4% may be over for good.

FED OUTLINES END FOR STIMULUS, STOCKS SLIP

Last Wednesday, Federal Reserve Chairman Ben Bernanke shared the central bank’s vision for winding down its current aggressive easing effort – the potential tapering of QE3 by late 2013, and the end of the program by mid-2014 if economic conditions permit. Wall Street reacted abruptly – the Dow sank more than 550 points in less than two trading sessions. In the near term, the Fed will keep buying $85 billion in bonds per month and maintain interest rates at near-zero levels.

INFLATION PRESSURE MINIMAL IN MAY

The 0.1% rise in the Consumer Price Index last month put yearly inflation at 1.4%, well under the Fed’s 2.0% target. Energy prices rose 0.4% in May but fell 1.0% in a year; medical costs declined 0.1% for May, the first monthly decrease since 1975

EXISTING HOME SALES IMPROVE

The National Association of Realtors reported a 4.2% jump in residential resales for May, with the annualized sales pace topping the 5 million mark for the first time in 3½ years. From May 2012 to May 2013, the median price of an existing home rose 15.4% to $208,000 as the number of listings on the market shrank 10.1%

LEADING INDICATORS EDGE NORTH 0.1% IN MAY

Slight improvement was seen in the Conference Board’s latest barometer of the economic outlook for the next 3-6 months, but economists surveyed by Bloomberg thought it would rise 0.2%. April’s gain was revised up to 0.8%.

OVERNIGHT

The Treasury market sold off during the Asia session after the PBOC vowed to address the cash crunch in China. During the London session everything caught a bid as Draghi vowed to maintain accommodative policies for the foreseeable future. In the US the market opened slightly higher and has marched nearly 3/4 point higher on the back of worse than expected GDP data. The data confirms that the economy is not in great shape

 LOOKING AHEAD

Economic
Indicator

Release
Date & Time

Consensus
Estimate


Analysis

Durable Goods Orders

Tuesday, June 25,
8:30 am, et

Up 1.8%

Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates.

New Home Sales

Tuesday, June 25,
10:00 am, et

428k

Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.

Consumer Confidence

Tuesday, June 25,
10:00 am, et

76

Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

2-year Treasury Note Auction

Tuesday, June 25,
1:15 pm, et

None

Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.

Q2 GDP revision

Wednesday, June 26,
8:30 am, et

Up 2.1%

Very important. The aggregate measure of US economic production. Weakness may lead to lower rates.

5-year Treasury Note Auction

Wednesday, June 26,
1:15 pm, et

None

Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.

Weekly Jobless Claims

Thursday, June 27,
8:30 am, et

348k

Important. An indication of employment. Higher claims may result in lower rates.

Personal Income and Outlays

Thursday, June 27,
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

Thursday, June 27,
8:30 am, et

Up 0.1%

Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve.

7-year Treasury Note Auction

Thursday, June 27,
1:15 pm, et

None

Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.

Consumer Sentiment

Friday, June 28,
10:00 am, et

57

Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.


Fed Disappoints

What happened to the low rates? Frequent readers knew that market rates would adjust before the Federal Reserve altered monetary policy. We call it “Guess the Fed”, where global traders look for any sign that policy may be adjusted in the FUTURE and react today by buying or selling assets. Who wants to hold a 10-year Treasury paying 1.67%, which it was a few weeks ago, when the exact same bond is currently paying 2.4%? Many, to include St. Louis Fed President James Bullard believe Ben Bernanke spoke too early. When Bernanke spoke of an exit plan earlier this week traders sold assets to lock in profits and prepare for a higher interest rate environment. Bernanke now has his work cut out for him and we have more volatility ahead.

If you would like more information on the current mortgage situation or find out if you qualify for a mortgage please call Al at 239-370-1158.  He will be happy to help and then call me at 239-601-3174 so we can start looking for your dream home!

Remember it is always toasty in Naples and you deserve your piece of Naples sunshine!

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