Mortgage Rates Rise But There Is Optimism In The Economy

gg61358708Guest Contributor Al Beatrice gives us his weekly update.  Call or email Al American Eagle Mortgage 239-370-1158  abeatrice@aemc.cc

QUOTE FOR THE WEEK

“Coming together is a beginning; keeping together is progress; working together is success.”

― Henry Ford

Market Comment

Mortgage bond prices were sharply lower last week pushing mortgage rates higher. The financial markets remain extremely volatile, a trend that is expected to continue. Investors feared the Fed Reserve (Fed) would reduce the stimulus spending that has enabled stocks to hit record highs and mortgage interest rates to test historic lows. The jobs data released last week was better than expected fueling the fear the Fed will start tapering asset purchases in the next couple of months. Mortgage markets are on edge.  ANY sign of economic growth could help push rates even higher. However, there is a chance the FED could head to the media again to calm the mortgage markets. If they do, rates could drift downward, but it would likely be a slow drift.

For the week, interest rates rose by about 3/8’s in rate. The minutes from the last Fed meeting will be released Wednesday and will be closely watched.

AMERICA ADDS 195,000 JOBS IN JUNE

Payroll growth in June matched that of May, according to the Labor Department (the May gain was revised upward). The private sector hired 202,000 new workers after adding 207,000 in May, offsetting reductions to government payrolls. Economists polled by Bloomberg had forecast net job growth of 165,000, so this was encouraging. Will it encourage the Federal Reserve to taper? The Fed’s next policy announcement occurs on July 31, but it will not revise its economic forecasts at that time and no press conference is scheduled afterward. Some economists think the Fed could start tapering QE3 as soon as September.1

ISM INDICES BOTH TOP 50

The June purchasing manager indices from the Institute for Supply Management both showed sector expansion. The pace of growth moderated in the service sector, with June’s reading of 52.2 down 1.5 points from May. ISM’s manufacturing index rebounded impressively from a 49.0 reading in May to 50.9 in June.2

1-YEAR DELAY FOR EMPLOYER HEALTH CARE MANDATE

The Obama administration is postponing one of the key reforms of the Affordable Care Act – businesses with 50 or more full-time employees now won’t have to provide health insurance to workers until 2015. As around 85% of Americans already have health care coverage, the decision doesn’t impact a majority of individuals or businesses. Most uninsured individuals will still need to buy health coverage in 2014 and businesses with fewer than 50 FTEs won’t be required to sponsor health insurance plans next year. Still, the delay raises new questions about whether national health care reforms can proceed on schedule.3,4

ABBREVIATED TRADING WEEK SEES BIG GAINS

Stocks started July well. The S&P 500 rose 1.59% in four days to settle at 1,631.89 Friday. The DJIA rose 1.52% to close at 15,135.84 at week’s end, and the NASDAQ advanced 2.24% to wrap up the week at 3,479.38. Oil settled at $103.22 Friday, with prices soaring 6.7% in a week on worries about political instability in Egypt.5,6

LOOKING AHEAD

Economic
Indicator

Release
Date & Time

Consensus
Estimate


Analysis

3-year Treasury Note Auction

Tuesday, July 9,
1:15 pm, et

None

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

10-year Treasury Note Auction

Wednesday, July 10,
1:15 pm, et

None

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

Fed Minutes

Wednesday, July 10,
2:00 pm, et

None

Important.  Details of the last Fed meeting will be thoroughly analyzed.

Weekly Jobless Claims

Thursday, July 11,
8:30 am, et

339k

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

30-year Treasury Bond Auction

Thursday, July 11,
1:15 pm, et

None

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

Producer Price Index

Friday, July 12,
8:30 am, et

Up 0.2%,
Core up 0.1%

Important.  An indication of inflationary pressures at the producer level.  Lower figures may lead to lower rates.

Consumer Sentiment

Friday, July 12,
10:00 am, et

79

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

Consumer Sentiment

In the US the consumer is often seen as the driving force of the economy. A large percentage of the total economic output is for personal use. Analysts attempt to predict the future spending patterns of consumers to gauge economic activity. 

The Michigan consumer sentiment index is one piece of data used to measure consumer attitudes. The index is derived from a telephone survey, which gathers information on consumer expectations of the overall economy. The preliminary report is released around the 10th of each month and then is revised throughout the remainder of the month. It is significant in that it provides a precursor into consumers’ willingness to spend in the months ahead. However, many analysts point out that willingness to spend does not always convert to actual expenditures.

Despite economic uncertainty, liquidity issues, housing market fluctuations, and high energy costs, American consumers continue to spend. However, many analysts question whether consumers can continue to buoy the economy. Look for any variation from estimates to cause mortgage interest rate volatility. Signs of eroding consumer confidence could lead to improvements in mortgage interest rates. However, stronger than expected figures could spike rates higher.

Remember that mortgage interest rates remain historically favorable and are subject to change on a daily basis.

Please call Al for all of your mortgage needs and then call me at 239-601-3174 so that we can find that perfect home for you and Al can process your mortgage and get you the financing you need.  Together we are a great team!

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

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