Market Reports
A Mortgage Update from Jay Skwierawski for the week of March 30
Hello Everybody!
I have just returned from spending a week with my family in Gulf Shores, Alabama. I have never been there before, and wasn't sure exactly what to expect. I was pleasantly surprised with whole experience! If you'd like to hear more about my trip, I've added a little bit about it under the chart at the bottom of the page!
As another volatile week in the mortgage bond market has ended, a new one is set to begin. The news out on the economy last week was, for the most part, market friendly, but that doesn't mean that it was without drama. As you'll see by the Japanese Candlestick chart above, Monday and Friday had some wild trading, while Tuesday, Wednesday and Thursday were fairly steady. When it was all said and done, mortgage rates finished the week little changed from where they began.
First, the news out on the economy, as reported last week:
Existing home sales came in higher than expected. This was certainly good news for us. Are buyers finally thawing out?
The first report of consumer confidence for the week came in much weaker than expected. With all the bad news being reported, who could blame the consumer for being depressed about the state of the economy?
Durable Goods Orders (those large items expected to last at least three years) came in much lower than expected.
New Home Sales came in higher than expected. That hasn't happened in quite some time. Buyers are looking at new homes, too!
Initial first time unemployment claims came in slightly lower than expected.
The final revision of the 4th quarter Gross Domestic Product came in as previously reported (+.6%), which was quite slow.
The Fed's favorite gauge of inflation - the Personal Consumption Expenditures (PCE) and core PCE, excluding food and energy, both came in slightly lower than expected. This was some very welcome, favorable news on inflation. The number came out within the Fed's target range for inflation.
Personal Income came in a little higher than expected, while Personal Spending came in as expected (slow!).
The final measure of consumers' moods - the University of Michigan Consumer Sentiment Index came in worse than expected.
The positive news on housing, which initially caused rates to go up was offset by the negative consumer and durable goods numbers, and then the market really liked the inflation figures. It was a pretty decent week for the mortgage bond market.
Next week there aren't a lot of market moving reports coming out, but the numbers that are due out are big ones!
Monday brings the Chicago Purchasing Managers' report, which has a HIGH impact on mortgage rates.
Tuesday's report is the ISM index, which also has a HIGH impact on mortgage rates.
Thursday has the ISM Services index (HIGH) and first time unemployment claims (Moderate)
Friday brings the monthly employment report (which happens on the first Friday of every month). The employment report includes information on new jobs created, the unemployment rate, average hourly earnings and average number of hours worked. The employment report typically has the HIGHEST impact of all monthly reports.
In addition to the economic reports, the markets will be watching the price of oil, any news out on the mortgage industry and mortgage investments, and the impact of recent changes in the mortgage industry on the housing market. Will last weeks advancements in existing and new home sales be affected by measures that FNMA, FHLMC and PMI companies have recently put into place to reduce and/or compensate for risk in the mortgages that they back? Hopefully you didn't miss our special report last week. FNMA and FHLMC have recently announced new risk based pricing that will mean that borrowers with credit scores under 720, that put down less than 40%, will be a higher rate due to their increased risk. It wasn't too long ago that if somebody had a 680 credit score, we would probably tell them that their score was "pretty good", and that their rate wouldn't be affected by their score. If they had a score of 700, we would probably tell them that their score was "very good", and they would most likely be eligible for reduced PMI costs and reduced documentation. The major PMI companies have announced that they will no longer insure any loans with less than 3% down. This will severely limit the number of options available for the "no down payment borrower". The Nehemiah program is still an option, especially with the new FHA loan limits. 80/20 loans went away months ago. Also this week, the state's first time homebuyer program (see IHDA.org) announced an increase in their minimum downpayment to 5% from 3%, and re-announced that they have a maximum debt to income ratio of 41%, which they had become laxed in sticking to.
With all of the changes that have been announced, mortgage rates are still very attractive. Hopefully some of the recent favorable press on the housing market will get more buyers out!
We will keep you posted on any new major developments in the economy and mortgage industry.
In the mean time, have a great week!
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
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