Market Reports
A mortgage update from Jay Skwierawski for the week of August 16
Please see the above economic calendar for the week of August 17 - August 21
Hello Everybody!
Interest rates fell last week, as good inflation numbers and weaker than expected reports on the economy brought the stock market's recent rally to a halt. Mortgage and treasury bonds improved in price (rates dropped) and the stock market had its first weekly loss in 5 weeks. This week brings fresh data on the economy that the markets will be watching closely for signs of improvement.
First let's take a look at what last week brought:
On Tuesday, we learned that Productivity in U.S. factories increased by 6.4 percent in the second quarter of the year, up from 0.3 percent in the previous quarter, and higher than the increase of 5.5 percent that was expected. Wednesday we had the conclusion of the most recent meeting of the Federal Reserve's Open Market Committee (FOMC). There were no major announcements out of the meeting. The Fed said that although it saw signs of the economy improving, it would not be changing its stance on interest rates at this time. It also announced that it would be phasing out its Treasury bond purchase program in the coming months. This could cause rates to increase in the future, but not quite yet. On Thursday, Retail Sales came in showing a 0.1 percent decline in July, less than the 0.8 percent increase in June and the 0.3 percent increase that was expected. This helped to fuel a rally in treasury and mortgage bond markets, as it showed that consumers were still favoring saving their money over spending it. Retail Sales, excluding auto sales showed a decrease of 0.6 percent in July, much worse than the 0.1 percent increase that was expected. First time unemployment claims had a surprising increase last week to 558,000. It was expected to show a decline. Friday's news on inflation was the icing on the cake for the interest rate markets, as it was reported that the consumer price index (CPI) and core CPI, excluding food and energy, came in very tame, as expected, with no increase in the CPI and only a 0.1 percent increase in the core CPI. Year over year inflation (since July of last year) fell 2.1 percent, the largest 12 month decline since January, 1950. Clearly, inflation is not a threat at this time, and that bodes well for interest rates. Industrial Production and Capacity Utilization, which measure what is going on in the nations factories, both came in as expected, which had little impact on rates. Finally, there was a decrease in consumer sentiment, as measured by a University of Michigan study.
In addition to the economic news released last week, there was also a record auction for U.S. Treasury bonds. The 3 year and 30 year auctions on Tuesday and Thursday went very well, with a lot of foreign buyers. Wednesday's auction of 10 year treasuries didn't go so well, so we saw a brief sell off in bonds, which quickly went away. Keep in mind that we need foreigners to purchase our debt (bonds) in order to be able to continue to fund the various programs that have been introduced to stimulate the economy. If there isn't enough foreign interest in our bonds, then rates have to go up to the point where foreign interest returns.
This week, we will expect the following information to be released. Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.
As we get closer to the fall home buying season, its very important to remember that the governments first time homebuyer tax credit is set to expire on November 30. Although there is talk that it might be extended, or changed, that hasn't happened yet. In order for first time homebuyers to qualify for the credit, they must CLOSE by November 30, 2009. That means that they probably have to be entered into a contract between now and the end of October at the latest. With the new appraisal and truth in lending rules that have recently taken place, the earlier a closing is planned the better. My guess is that there are going to be a lot of contracts written with closing dates of November 30, and that title companies will not be able to handle the load. PLAN AHEAD!
Have a great week, and please refer your buyers to First Sterling Mortgage Services for all of their mortgage needs!
Thank you!
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
WE CLOSE ON TIME - EVERY TIME!
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