Last Friday mortgage prices increased a little, but not much; holiday trade generally doesn’t amount to much. This morning the bond and mortgage markets opened better with no data points today; this week however, is filled with data beginning tomorrow. The dollar is stronger again this morning, not what equity markets want to see, the stock index futures were lower as a result. The US rate markets are supported on concern the rescue for Ireland will fail to contain Europe’s sovereign-debt crisis, increasing demand for the safety of U.S. government debt. Next up are Portugal and Spain as Europe’s debt issues show little signs of being contained. The tensions between South and North Korea continue to be a concern but so far as these kinds of face offs go, it hasn’t been a major impact on the markets.

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Christmas shopping (yes, I said Christmas) was slightly stronger than last year. Consumer spending on Black Friday was up about 0.3%, with most retailers better but still remains an unfinished story. Not anyway scientific, I was out briefly on Sunday and wasn’t impressed with what I saw at the most prestigious malls in Indy, not as much traffic as one would have expected. Most analysts expect stronger Christmas sales than last year, but refrain from becoming too optimistic.

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More QE 2 Fed buying today; the Fed is scheduled today to buy $1.5B to $2.5B of Treasuries due from February 2021 to November 2027 and $6B to $8B in government debt maturing from May 2013 to November 2014. The central bank plans to focus about 86% of its purchases on notes due in 2.5 years to 10 years, leaving the 30- year bond as the security that most closely reflects market expectations for inflation. Since the Fed’s Nov. 3 announcement, the 30-year yield rose 0.28 percentage points, suggesting growing investor confidence in the central bank’s efforts to avoid deflation as the economy expands.

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Date Time (ET) Statistic For Market Expects Prior
11/30/10 09:00:00 AM Case-Shiller 20-city Index Sep 1.00% 1.70%
11/30/10 10:00:00 AM Consumer Confidence Nov 52 50.2
12/01/10 08:15:00 AM ADP Employment Report Nov 58K 43K
12/01/10 08:30:00 AM Productivity-Rev. Q3 2.40% 1.9
12/01/10 10:00:00 AM ISM Index Nov 56.5 56.9
12/01/10 10:00:00 AM Construction Spending Oct -0.50% 0.50%
12/01/10 02:00:00 PM Auto Sales Nov 3.71M 3.68M
12/01/10 02:00:00 PM Truck Sales Nov 5.35M 5.59M
12/01/10 02:00:00 PM Fed’s Beige Book Dec
12/02/10 08:30:00 AM Continuing Claims 11/20/10 4200K 4182K
12/02/10 08:30:00 AM Initial Claims 11/27/10 422K 407K
12/02/10 10:00:00 AM Pending Home Sales Oct 0.00% -1.80%
12/03/10 08:30:00 AM Nonfarm Payrolls Nov 130K 151K
12/03/10 08:30:00 AM Nonfarm Private Payrolls Nov 140K 159K
12/03/10 08:30:00 AM Unemployment Rate Nov 9.60% 9.60%
12/03/10 10:00:00 AM Factory Orders Oct -1.30% 2.10%

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Overall, the most important day of the week is Friday with the employment figures being released, but we may also see sizable movement in rates Wednesday. Friday’s employment data could cause a significant change in rates, but Wednesday’s ISM index is also one of the more important reports we see each month. If Friday’s data reveals stronger than expected results we may see rates spike higher after its release, possibly erasing any gains from the week. It will probably be the key to rates moving lower or higher for the week. I suspect it will be another fairly active week for the markets and mortgage pricing, so it would be prudent to maintain contact with your mortgage professional if still floating an interest rate.

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Richmond region home prices rise | Richmond Times-Dispatch.

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Two pieces of economic news this morning, which may influence mortgage rates to drop:

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Housing Starts are at lowest level in 18 months.  U.S. housing starts fall 11.7% in October

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CPI rise smallest on record.  October inflation tame.

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Advise here is to look at mortgage rates today and consider locking.

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30 Year Fixed Mortgage Backed Bond Price

Thursday the news from Freddie Mac was that mortgage rates had hit new record lows.  Talk of QE2, not the cruise ship but the Fed’s second round of quantitative easing, had many of those ready to lock their refinance mortgage rate hold off in hopes that rates would get even lower.  Friday morning prices of mortgage backed securities were up so rates were down a smudge.  Things rapidly reversed and between Friday and Monday the cost of that same mortgage note rate went up by about 2 points, $6,000 in additional closing costs on a typical $300,000 loan.

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The lesson here is if you are happy with saving the money on your refinance go ahead limit the risk and lock that rate.

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www.PaulCantor.info

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Mortgage rates ended the week about 25 bps better than the end of the previous week.  We did see quite a bit of fluctuation in mortgage backed securities throughout the week.

Not much in the data world this week; on Thursday the bond and mortgage markets will be closed for Veteran’s Day while equity and futures markets will stay open.

Date Time (ET) Statistic For Market Expects Prior
11/09/10 10:00:00 AM Wholesale Inventories Sep 0.60% 0.80%
11/10/10 07:00:00 AM MBA Mortgage Applications 11/05/10 NA -5.00%
11/10/10 08:30:00 AM Trade Balance Sep -$46.2B -46.3B
11/10/10 08:30:00 AM Export Prices ex-ag. Oct NA 0.30%
11/10/10 08:30:00 AM Import Prices ex-oil Oct NA 0.30%
11/10/10 08:30:00 AM Trade Balance Sep -$44.8B -46.3B
11/10/10 08:30:00 AM Export Prices ex-ag. Oct NA 0.30%
11/10/10 08:30:00 AM Import Prices ex-oil Oct NA 0.30%
11/10/10 10:30:00 AM Crude Inventories 11/06/10 NA 1.95M
11/10/10 02:00:00 PM Treasury Budget Oct -$140.0B -$176.4B
11/12/10 09:55:00 AM Mich Sentiment Nov 69 67.7

Still a lot of hand-wringing around the world over the Fed’s decision to buy $600B of treasuries. Most central bankers worry over the potential of currency wars with countries trying to drive their currencies lower to capture export business. Unlikely that will occur but with the Fed out at the edge with its QE uncertainty is the dominating concern now. Over the weekend Bernanke commented the Fed isn’t aiming at an increase in inflation, really? What Bernanke meant to imply (we suppose) is that the Fed isn’t trying to set off an inflationary spiral but in an attempt to drive off deflation fears, the Fed does want the level of inflation to increase to its general target of 2.0% to 2.5% frm 1.0% presently. “I have rejected any notion that we are going to raise inflation to a super-normal level in order to have effects on the economy,” Bernanke said in a panel discussion at a Fed conference in Jekyll Island, Georgia. “It’s critical for us to maintain inflation at an appropriate level.” Friday G-20 meets with leaders of their countries; looks like the US will have a lot to convince other G-20 countries that we are on the correct path.

Since the FOMC meeting on 9/21 when the Fed said it was prepared to add additional stimulus with another QE the bellwether 10 yr note and mortgage rates have rallied, then retreated to leave those rates slightly lower but so far there has not been the move many were expecting. Many analysts and economists were forecasting the 10 yr note would fall to 2.25% frm 2.50% area now. We thought then, and now, that rates would not likely fall much on the easing. If, as the Fed believes, interest rates at the short and belly of the curve stay generally low it will add growth in the economy and likely edge inflation up a tad; hard to paint the picture of much lower long term rates under those circumstances.

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Last week  bond prices dropped driving mortgage rates up for the week..

This week is one big week for the markets. Since Sept 21st at the conclusion of the FOMC meeting when the Fed announced it was prepared to buy more treasuries the bond and mortgage markets have had a yo-yo ride. On the announcement it set up a big move lower in rates taking the 10 yr down 40 basis points, then markets began to see an easing move as a step to increase inflation and the bond and mortgage markets turned and now sit about where interest rates were prior to the FOMC meeting. On Wednesday the FOMC will actually announce what the Fed intends. Unless there is some form of shock and awe the Fed’s easing move may simply be another failed attempt to revive the housing markets and the economy. .

Economic Calendar: .

Date Time (ET) Statistic For Actual Market Expects Prior
11/01/10 08:30:00 AM Personal Income Sep -0.10% 0.20% 0.40%
11/01/10 08:30:00 AM Personal Spending Sep 0.20% 0.40% 0.50%
11/01/10 08:30:00 AM PCE Prices – Core Sep 0.00% 0.00% 0.10%
11/01/10 10:00:00 AM ISM Index Oct 54 54.4
11/01/10 10:00:00 AM Construction Spending Sep -0.70% 0.40%
11/03/10 07:00:00 AM MBA Mortgage Applications 10/29/10 NA 3.20%
11/03/10 07:30:00 AM Challenger Job Cuts (y/y) Oct NA -44.10%
11/03/10 08:15:00 AM ADP Employment Change Oct 23K -39K
11/03/10 10:00:00 AM ISM Services Oct 53.4 53.2
11/03/10 10:00:00 AM Factory Orders Sep 1.70% -0.50%
11/03/10 10:30:00 AM Crude Inventories 10/30/10 NA 5.01M
11/03/10 02:00:00 PM Auto Sales Oct 3.8M 3.75M
11/03/10 02:00:00 PM Truck Sales Oct 5.1M 5.07M
11/03/10 02:15:00 PM FOMC Rate Decision 11/03/10 0.25% 0.25%
11/04/10 08:30:00 AM Initial Claims 10/30/10 445K 434K
11/04/10 08:30:00 AM Continuing Claims 10/23/10 4386K 4356K
11/04/10 08:30:00 AM Productivity-Prel Q3 0.90% -1.80%
11/05/10 08:30:00 AM Nonfarm Payrolls Oct 60K -95K
11/05/10 08:30:00 AM Nonfarm Payrolls – Private Oct 60K 64K
11/05/10 08:30:00 AM Unemployment Rate Oct 9.60% 9.60%
11/05/10 08:30:00 AM Hourly Earnings Oct 0.10% 0.00%
11/05/10 08:30:00 AM Average Workweek Oct 34.2 34.2
11/05/10 10:00:00 AM Pending Home Sales Sep 2.50% 4.30%
11/05/10 03:00:00 PM Consumer Credit Sep -$3.5B -$3.3B

Economic data ends the week with the employment report on Friday. In the meantime the data calendar has key data ;points everyday this week except Tuesday, election day. The election is the least of the issues this week as there is little doubt Republicans will take the House but likely not the Senate. Talk of grid-lock with the change in Congress; normally considered good, grid-lock this time is something to avoid with the economy barely holding on. Nothing expected from the elections until January when the new Congress gets underway, in the meantime the lame duck Congress is all about scrambling the eggs. Extending the tax cuts coming at the end of the year is the main event.

Difficult to predict how the bond market will take the FOMC policy statement on Wednesday, in the meantime the rate markets will likely stay about where they are. Friday’s Oct employment report is expected with just 60K non-farm private job growth and the unemployment rate unchanged at 9.6%. Unless job growth exceeds 100K a month it doesn’t even cover the new entries in the job market let alone those that have lost jobs in the recession

www.PaulCantor.infoo

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Credit scores are becoming more and more important to home buyers.  Mortgage rate pricing is based in part on credit scores.  A home loan refinance may not make sense because a score is 1 point below a 680 or 720.  Someone with a 619 FICO score will have trouble qualifying for a mortgage to buy that first home.  Fair Isaacs now has a cool new tool to estimate a FICO score without pulling a credit report.  Check out the Free FICO® Credit Score Estimator.

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Reprieve after six straight days of worsening fixed mortgage rates. Rates on 15 and 30 year fixed rate purchase and refinance loans ended yesterday, October 28th in a positive (lower rate) direction.

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www.PaulCantor.info

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New home sales rise 6.6 percent for September | Richmond Times-Dispatch.

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Mortgage rates remain at unbelievable low levels but ended higher at the end of last week.  It is time for those considering purchasing or refinancing to talk with a mortgage professional.  We are now close to Election Day, which history shows rates often hit low levels in the second half of October.

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This week brings us the release of four major economic reports for the markets to digest, but none of them are considered to be highly important to mortgage rates. However, this by no means leads me to believe we will have an uneventful week. This will be an extremely busy week for corporate earnings, which usually translates into stock volatility. The lack of important economic data on this week’s calendar makes it more likely that any significant swings in stock prices will influence bond trading and mortgage rates.

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Date Time (ET) Statistic For Market Expects Prior
10/18/10 09:15:00 AM Industrial Production Sep 0.20% 0.20%
10/18/10 09:15:00 AM Capacity Utilization Sep 74.80% 74.70%
10/18/10 10:00:00 AM NAHB Housing Market Index Oct 13 13
10/19/10 08:30:00 AM Housing Starts Sep 579K 598K
10/19/10 08:30:00 AM Building Permits Sep 565K 569K
10/20/10 07:00:00 AM MBA Mortgage Applications 10/15/10 NA 14.60%
10/20/10 02:00:00 PM Fed’s Beige Book Oct
10/21/10 08:30:00 AM Initial Claims 10/16/10 455K 462K
10/21/10 08:30:00 AM Continuing Claims 10/09/10 4400K 4399K
10/21/10 10:00:00 AM Leading Indicators Sep 0.30% 0.30%
10/21/10 10:00:00 AM Philadelphia Fed Oct 1.4 -0.7

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September’s Industrial Production will give  an indication of manufacturing strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.2% increase in output from August’s level, meaning that manufacturing activity rose slightly. A larger than expected increase in output would be negative for bonds and mortgage rates as it would indicate economic strength. A decline in output would likely push mortgage rates lower tomorrow morning.
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September’s Housing Starts is the week’s second release, coming early Tuesday morning. This report will probably not have much of an impact on the bond market or mortgage rates. It gives us a measurement of housing sector strength and mortgage credit demand by tracking construction starts of new homes, but is usually considered to be of low importance to the financial and mortgage markets. It is expected to show a decline in new home starts between August and September. I believe we need to see a significant surprise in this data for it to influence mortgage rates.
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The only report scheduled for release Wednesday will be released during afternoon trading when the Federal Reserve will post its Beige Book at 2:00 PM ET. This data details economic conditions throughout the U.S. by region. It is relied upon heavily by the Federal Reserve when determining monetary policy at their FOMC meetings. If it reveals stronger signs of economic growth from the last release, we could see mortgage rates revise higher shortly after its release.

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The last report is September’s Leading Economic Indicators (LEI) late Thursday morning. This index attempts to measure future economic activity, particularly during the next three to six months. Current forecasts are calling for an increase of 0.3% from August’s reading. This would indicate that economic activity is likely to increase moderately over the next couple of months. That would be relatively bad news for the bond market and mortgage rates, but this report is considered to be only moderately important. Therefore, a small increase would not be of much concern to the bond and mortgage markets. Ideally, we would like to see a decline in the index.
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Overall, I don’t see a particular day that should be labeled the single most important. The week’s economic reports are all moderately important to the markets, so we can’t rely on any of them to drive rates. In fact, the biggest force behind any noticeable moves in mortgage pricing may actually come from the stock markets. There are many companies posting earning reports during the week, including some big names that include Apple and Citigroup. If the corporate earnings releases are generally weaker than forecasts, stocks may suffer, making bonds more appealing to investors. The end result would likely be an improvement in rates. The flip side though is stronger than expected earnings that drive stocks higher, pushing bond prices lower and mortgage rates upward.

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Considering whether to lock  a refinance or to buy that new home?  Now is the time consult your mortgage loan officer.

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www.PaulCantor.info

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