Market Reports
A Mortgage Update from Jay Skwierawski for the week of April 13
Hello Everybody!
Last week, the mortgage market enjoyed a rather quiet week, and interest rates remained steady from Monday to Friday.
But before I get into the markets and economic reports, reading some articles in the newspaper this week reminded me of a story I had heard a few years back:
Mr. Johannson, the top real estate agent in the community, had commissioned a local artist to paint a portrait of his family as a surprise for his wife Buffy for Christmas. The artist was busy at the time, but promised Mr. Johannson that he would start the painting in August, and it would, indeed, be finished by Christmas time so he could present it to Buffy. In August, the artist contacted Mr. Johannson and said that he was ready to start the painting. Mr. Johannson responded that he had read in the newspaper that the housing market was taking a turn for the worse, and that, although his business was still going strong, he would have to cancel the portrait, because "bad times were on the way". Upon hearing this news, the artist contacted his home improvement contractor. He was just about to have his basement finished, but "with bad times on the way," he decided to hold off until things got better. The home improvement contractor had not yet heard this news, but when the artist told him what was about to happen, he called his new truck salesman. He had just negotiated to buy a new truck for his business, but with "bad times on the way," he would hold off on purchasing the truck, until he would have enough business to warrant a new truck. The new truck salesman was quite dismayed upon hearing the news. He and his wife had just decided that they wouldn't put off getting their daughter's braces until high school. They would take care of her cross bite in 7th grade, as the orthodontist had recommended. But, upon hearing that "bad times were on the way," they called the orthodontist to tell him that they weren't going to be able to afford the braces at this time, and they would contact him when times got better. This news certainly caught the orthodontist by surprise. He and his wife had just decided it was time to "move up" to the North Shore. However, now that "bad times were on the way," they decided they better hold off on moving, so they contacted their real estate agent - Mr. Johannson, and canceled their appointment with him to list their home and start looking at new times.
The moral of the story - don't believe everything that you hear. Interest rates are near all-time lows. There are still plenty of mortgage programs out there for qualified borrowers, and home prices in most areas are not dropping as much as the media would have you believe.
So, back to the news. Last week, there wasn't much economic news released, but what did come out was, for the most part, favorable for mortgage rates:
First time claims for unemployment came in quite a bit smaller than expected, but still high enough to be worrisome for the employment picture. The trade balance came in higher than anticipated, meaning we were importing more than we were exporting, however much of this could have to do with the high cost of oil. Finally, the University of Michigan Consumer Sentiment index came in at a 25 year low. Talk about your self fulfilling prophecies. The more that consumers hear about how bad consumers think things are, the more likely they are hold back on making large purchases (like homes and automobiles). This would, of course, not bode well for future economic reports, which could lead to a further economic slowdown and MAYBE lower interest rates.
Although last week's economic reports were a "wash" for mortgage rates, this coming week could see some real movement. There is a lot of news slated to come out this week, including:
Monday - Retail Sales - (HIGH impact on rates) - Were consumers out buying last month?
Monday - Retail Sales, excluding Autos - (HIGH)
Tuesday - Producer Price Index (PPI) and Core PPI (excluding food & energy) (HIGH) - The first inflation index for March - inflation at the producer level.
Tuesday - Empire Manufacturing Index (Moderate) - How are things going in New York?
Wednesday - Industrial Production (Moderate) - How are the nation's factories doing?
Wednesday - Capacity Utilization (Moderate) - Are those factories working to their limits?
Wednesday - Consumer Price Index and core CPI (HIGH) - Inflation at the consumer level
Wednesday - Housing Starts (Moderate) - Have builders started building houses, again?
Wednesday - New House Permits (Moderate) - Do those builders have plans to build more houses in the future?
Thursday - First time unemployment claims (Moderate) - Was last week's decrease in claims a fluke, or was the week before's huge jump over 400,000 claims a fluke?
Thursday - Index of Leading Economic Indicators (Low) - What do the next six months hold for the economy?
Thursday - Philadelphia Fed Index (HIGH) - How is the economy on the east coast, which is an indication of the US economy?
With so many reports due out next week, it is bound to be a crazy week for mortgage rates. There hasn't been a lot of news out on mortgage companies and mortgage investments, so perhaps we're due for some of that too! The big news of last week was when Washington Mutual announced that they were closing most of their retail mortgage branches, and phasing out of the wholesale business where they purchased mortgage loans from mortgage brokers. This was not totally unexpected. If there are any other big stories reported, we will be sure to keep you in the loop!
In the meantime, have a great week!
Above is this week's candlestick chart (courtesy of Mortgage Market Guide, a paid subscription service that I subscribe to which helps to keep me informed of happenings in the economy which affect our business). Remember, green is good, up is good, red and down are bad. As you will notice, market movement lately has been very flat, which means mortgage rates are holding steady.
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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