Jobs in focus this week (again)Mortgage markets worsened last week as nuclear meltdown concerns eased across Japan, and the war within Libya moved closer to a potential finish.

Wall Street voted with its dollars, and a return to risk-taking emerged. “Safe haven” buying softened last week and, as a result, conforming mortgage rates in Virginia made their biggest 1-week spike since late-January.

Mortgage rates remain historically low, but well above their November 2010 lows.

This week, rates could run higher again. Friday’s jobs report is a major story and it will affect mortgage rates in Richmond and across the country. Jobs are a key component of the nation’s economic recovery, and as the economy has improved, mortgage rates have tended to rise.

Economists expect that 190,000 jobs were created in March. If they’re correct, it will raise the 12-month tally to 1.3 million net new jobs created nationwide. This is still less than the 2 million jobs lost in the 12 months prior, but it’s a positive step that suggests sustained growth.

A positive net new jobs figure for March would mark the first time since June 2007 that jobs growth was net positive 6 months in a row. If March’s final figures are better than expected, expected mortgage rates to rise. If the figures are less, look for rates to fall.

The Unemployment Rate is expected to stay sub-9.0 percent, too.

Other news that could change rates this week include Monday’s Pending Home Sales report, Tuesday’s Consumer Confidence data, and any one of the 4 speeches from members of the Fed. In general, data and/or rhetoric that suggest more growth in 2011 will cause mortgage rates to rise.

If you are still floating a mortgage rate and have yet to lock one in, this week may represent your last chance for low rates. Good news about the economy will put pressure on mortgage rates to rise.

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Comparing 30-year fixed to 15-year fixed (2006-2011)

It’s a great time for Richmond buyers and homeowners to look at the 15-year fixed rate mortgage.

According to Freddie Mac’s weekly Primary Mortgage Market Survey, the relative “discount” of a 15-year fixed rate loan as compared to a comparable 30-year product is the largest in recorded history. The interest rate spread between the two benchmark products is now 0.77%, nearly double the recent, 5-year average of 0.44%.

Despite its lower rates, however, homeowners that opt for a 15-year fixed mortgage should be prepared for higher monthly payments. This is because the principal balance of a 15-year fixed is repaid in half as many years as with a 30-year amortizing product.

The payment increase is 41% higher at today’s rates. If you can manage that, though, you’ll reap dramatic interest payments savings over time. For each $100,000 borrowed at today’s market interest rates, your mortgage interest costs on a conforming 15-year term mortgage will be lower by $56,000 versus an identically-structured 30-year term. The more you borrow, the more you save.

That said, not everyone should use the 15-year product.

One reason you may want to avoid 15-year products is because the higher payments may lead to financial stress. Unless your monthly income far exceeds your monthly debts, choosing a 30-year product may feel safer for you.

Another reason is that, with less mortgage interest paid, 15-year mortgages don’t allow for as many mortgage interest tax deductions. This can have tax implications to you each year. Or, maybe you prefer to have your home leveraged, investing “spare dollars” in stocks and bonds.

These are all legitimate cases to stick with a 30-year term, but if you’ve ever explored the idea of using a 15-year fixed rate mortgage for your home, today, the math is in your favor. Talk to your loan officer before the rates start rising.

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Existing and new home sales are the main focus but unlikely to show any change in the trend of weak sales that has been the situation for two years. Japan’s problems with their nuclear reactors remain but the latest reports imply some progress on a couple of reactors while  another reactor is weakening. In Libya the UN forces clobbered Libyan positions with heavy use of missiles but Qaddafi remains defiant. Treasuries and mortgage rates are likely to stay within a tight range as long as there is no change in the situations in Japan and in the Mideast.


Date Time (ET) Statistic For Market Expects Prior
03/21/11 10:00:00 AM Existing Home Sales Feb 5.05M 5.36M
03/22/11 10:00:00 AM FHFA Housing Price Index Jan NA -0.30%
03/23/11 10:00:00 AM New Home Sales Feb 287K 284K
03/24/11 08:30:00 AM Initial Claims 03/19/11 384K 385K
03/24/11 08:30:00 AM Durable Orders Feb 1.10% 3.20%
03/24/11 08:30:00 AM Durable Orders ex Transportation Feb 1.80% -3.00%
03/25/11 08:30:00 AM GDP – Third Estimate Q4 2.90% 2.80%
03/25/11 08:30:00 AM GDP Deflator – Third Estimate Q4 0.40% 0.40%
03/25/11 09:55:00 AM Michigan Sentiment – Final Mar 68 68.2


The stock market, after the strong selling on panic moves is likely to rebound and recover most of the losses on the indexes. Gold and oil prices are likely to increase after a volatile last week. Through the week as long as investors return to equity markets the bond and mortgage markets will see prices fall and yields increase. The week is very likely to be volatile from day to day with unfolding news out of Japan and the Mideast. We do not expect interest rates to increase a lot, but we also don’t see any major decline this week. Still suggest using the recent rate decline to get deals done and not get enthused about lower rates. Interest rates are not likely to fall much while the wider perspective is still bearish as the US economy improves and the ECB likely to raise rates.


All this volatility means Richmond area mortgage rate shoppers should consider locking this week.  Call me at 804-433-1510 to discuss locking a mortgage rate


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Fed Funds Rate vs 30-Year Fixed Rate MortgageMortgage markets improved again last week despite an inflation-acknowledging statement from the FOMC and stronger-than-expected jobless data.

Usually, events like this would lead mortgage rates higher, but violence in the Middle East and worsening fear for public safety in Japan took center stage instead, spurring a massive, global flight-to-quality instead.

Rate shoppers in Henrico  benefited.

As safe haven buying increased last week, conforming mortgage rates dropped, falling to their lowest levels since January. It marked the 5th straight week through which mortgage rates improved and is the longest such streak since August 2010.

This week, rates may run lower again. You may not want to gamble on it, though. Here’s why.

In general, when there’s inflation in the U.S. economy, mortgage rates rise. This is because inflation devalues mortgage bonds, the underlying security on which mortgage rates are based.

So, last Tuesday, the Federal Open Market Committee met and in its post-meeting press release, the group said inflation pressures were building, a signal that rates should rise. It then went one step further.

To keep the economy from slipping back into recession or into disinflation, the FOMC also said it plans to keep its existing monetary policies in place for the foreseeable future.  This, too, is considered inflationary — another signal that rates should rise. And they did. 

Immediately following the FOMC announcement, mortgage rates spiked. But it didn’t last.

Starting Wednesday, the battles in Libya grew more intense, and Japan battled with its own domestic crisis (i.e. a potential nuclear meltdown). The economic implications of the events spurred the purchase of “safe” assets, and mortgage bonds improved.

And this is why mortgage rates won’t stay low for long.

Eventually, Wall Street will come to terms with Libya and Japan and the flight-to-quality will reverse. Inflation, however, is not likely to lessen. At least, not anytime soon.  Therefore, this week may represent the low-point in mortgage rates for a while. It’s important to lock your low rate while you still can.

There isn’t much economic data due this week so mortgage rates will take their cues from the broader market. If you haven’t locked a rate yet, or were waiting for rates to fall, this might be your best chance. Call your loan officer as soon as possible and get a fresh rate quote today.

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Home Loan Rates Fall

Mar 18, 2011

Due to all the unfortunate crisis’ going on in the world mortgage rates are low.  These rates have not been seen since November, 2010.  The earthquake, surname and nuclear emergency in Japan, along with the uncertainty throughout the Middle East, scarce many investors, who are putting their money in the traditional safe place of the US bond markets.  With all this volatility and the outlook of rising inflation home buyers and home owners considering refinancing should consider locking a mortgage rate.

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Bond and equity markets face the problems coming out of Japan and the FOMC meeting on Tuesday. The economic data, while always important, is a little less so now while investors try and handicap the economic importance of the impact of Japan’s earthquakes. Two reports on inflation with PPI and CPI due out on Wednesday and Thursday, inflation continues to get attention, although many are not concerned. Weekly claims are expected to be lower on Thursday and the Philadelphia Fed index of business strength on Thursday are the two keys for data.

Date Time (ET) Statistic For Market Expects Prior
03/15/11 02:15:00 PM FOMC Rate Decision Mar 0.25% 0.25%
03/16/11 08:30:00 AM Housing Starts Feb 575K 596K
03/16/11 08:30:00 AM Building Permits Feb 573K 562K
03/16/11 08:30:00 AM PPI Feb 0.60% 0.80%
03/16/11 08:30:00 AM Core PPI Feb 0.20% 0.50%
03/16/11 10:30:00 AM Crude Inventories 03/12/11 NA 2.52M
03/17/11 08:30:00 AM Initial Claims 03/12/11 386K 397K
03/17/11 08:30:00 AM CPI Feb 0.40% 0.40%
03/17/11 08:30:00 AM Core CPI Feb 0.10% 0.20%
03/17/11 09:15:00 AM Industrial Production Feb 0.60% -0.10%
03/17/11 09:15:00 AM Capacity Utilization Feb 76.50% 76.10%
03/17/11 10:00:00 AM Leading Indicators Feb 1.00% 0.10%
03/17/11 10:00:00 AM Philadelphia Fed Mar 28.1 35.9


The Fed meets Tuesday, we are not looking for anything significant from the meeting. The short statement will likely be about the same as in the past; the fed stands ready to keep rates low, the job market is still struggling, the Fed will complete QE 2 but will not completely abandon a possible QE 3 although that is not likely with the economic improvement. The bond and mortgage markets are somewhat more encouraging, both the 10 yr note and mortgages have moved through their respective resistance levels. That said, rates are tied directly to stock market direction; a rally in equities will push rate prices lower and could change the dynamics overnight.

Wednesday morning the Labor Department will post February’s Producer Price Index. This important index measures inflationary pressures at the producer level of the economy. There are two portions of the index- the overall reading and the core data. The core data is more important and watched more closely because it excludes more volatile food and energy (including gasoline) prices. If the index shows a large increase, inflation concerns will rise, making long-term investments such as mortgage-related bonds less attractive to investors. This would lead to higher mortgage rates Wednesday morning. Current forecasts are calling for a 0.6% increase in the overall reading and a 0.2% increase in the core data.

Also Wednesday, February’s Housing Starts report will be posted but it will likely not have much of an impact on mortgage rates. It gives us a measurement of housing sector strength and future mortgage credit demand, but is usually considered to be of fairly low importance to the financial markets unless it shows a large variance between forecasts and actual number of new home starts. It is expected to show a decline in new starts from January to February, signaling weakness in the housing sector.

Overall, look for Thursday to be the most important day of the week due to the CPI release, but tomorrow’s FOMC meeting can also heavily influence the markets. Wednesday may also be an active day for rates with the PPI on tap. Friday will probably be the calmest day for mortgage rates, but it appears there is a good possibility of seeing plenty of movement in rates the next several days. Therefore, please proceed cautiously if still floating an interest rate.

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FOMC meets this weekMortgage markets improved last week in a week of few economic releases. The one major data point — Retail Sales — showed stronger-than-expected, but markets reacted mildly. The report’s strength was whispered in advance of the actual release; its reading validated Wall Street’s growing faith in the U.S. economy.

Most action last week revolved around the Middle East:

In response to these events, Wall Street continued its flight-to-quality. Mortgage-backed bonds are now at their best levels since early-February. Mortgage rates have improved 4 straight weeks.

Unfortunately for rate shoppers in Virginia , the gains have been meager. Conforming mortgage rates have only dropped slightly.

This week, however, the market could move in either direction.

The biggest news on tap is the Federal Open Market Committee’s 1-day meeting, scheduled for Tuesday. The Fed is expected to leave the Fed Funds Rate near 0.000 percent, but that doesn’t mean that mortgage rates won’t change. The FOMC’s post-meeting press release will be closely scrutinized on Wall Street. Any changes in theme, tone, or message will cause mortgage rates to dart.

This week also marks the return of housing data with Housing Starts, Building Permits, and Homebuilder Confidence due for release. Housing is believed to be key to the economic recovery so strength in these reports should lead mortgage rates higher.

In addition, several inflation-related data sets will be released including Consumer Price Index and Producer Price Index. Inflation is generally bad for mortgage rates and with gas prices rising to a multi-year high, pressure will be on for mortgage rates to rise.

Lastly, there’s Japan.

The nation’s earthquake, tsunami, and (now) looming nuclear threat will have implications on the global bond market. Mortgage rates may benefit while the crisis remains unresolved. 

If you’ve floated a mortgage rate over the past few weeks, it may be time to lock that rate down. Economic factors should be pushing rates higher, but geopolitics and natural disasters are keeping them low.

It’s a perfect time to commit to a loan.

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At the end of last week mortgage rates were basically flat from the beginning of the week.  However they took a significant spike during the week.

This Week does not have not much in the way of economic releases. Monday Feb consumer confidence and on Friday Feb retail sales are about all there is except for the weekly jobless claims. The week has Treasury selling $66B of note and bonds beginning on Tuesday through Thursday. The interest markets are no longer tied to safety moves form issues developing in the Mideast or Libya, crude oil is going to continue to increase but unlikely will have the impact on US rate markets has it had over the previous three weeks. The Feb employment rate port last Friday added increased belief the economic recovery is improving.

Date Time (ET) Statistic For Market Expects Prior
03/07/11 03:00:00 PM Consumer Credit Jan $3.3B $6.1B
03/10/11 08:30:00 AM Initial Claims 03/05/11 382K 368K
03/10/11 08:30:00 AM Trade Balance Jan -$41.5B -$40.6B
03/10/11 02:00:00 PM Treasury Budget Feb -$196B -$220.9B
03/11/11 08:30:00 AM Retail Sales Feb 1.00% 0.30%
03/11/11 09:55:00 AM Mich Sentiment Mar 76.5 77.5
03/11/11 10:00:00 AM Business Inventories Jan 0.80% 0.80%


January’s Goods and Services Trade Balance is the week’s first economic data. It comes early Thursday morning and gives us the size of the U.S. trade deficit. It is the week’s least important piece of news and likely will not influence mortgage rates much. Current forecasts are calling for a $41.5 billion trade deficit during January, but we will need to see a large variance from this estimate for the news to influence bond trading enough to affect mortgage pricing.

There will be two reports posted Friday morning. The first is at 8:30 AM and is the most important of the week. This is when the Commerce Department will post February’s Retail Sales data. It is extremely important to the financial markets because it measures consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, data that is related usually has a big impact on the markets. This month’s report is expected to show an increase in sales of approximately 1.0%. If Friday’s release reveals a larger than expected increase, the bond market will likely fall and mortgage rates will move higher as it would indicate economic growth. If it reveals a much smaller than expected increase, I expect to see bond prices rise and mortgage rates improve Friday morning.

Also on tap Friday is the University of Michigan’s Index of Consumer Sentiment for March at 9:45 AM. This index gives us a measurement of consumer willingness to spend. If confidence is rising, then consumers are more apt to make large purchases. This helps fuel consumer spending and economic growth. A drop in confidence will probably hurt the stock markets and boost bond prices, leading to lower mortgage rates. If the index rises, indicating that confidence is rising and spending will likely follow, we may see mortgage rates move higher late Friday morning. It is expected to show a reading of 76.5, which is would be a noticeable decline from February’s final reading 77.5.

Friday will probably be the most important day of the week with the Retail Sales report due, while the calmest day could be tomorrow or Tuesday, depending on the stock markets. I am expecting to see the most movement in rates the latter part of the week, so please be careful if still floating an interest rate.

The outlook for mortgage rates remains up; however the path will be choppy. Suggest using any rallies to lock a rate.


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Watch this NBC video, advising prospective first time home buyers to get off the fence and buy a home.  The reasons include, home affordability, low but sure to rise  mortgage rates, seller concessions (buyer’s market) and the uncertain future of Fannie Mae & Freddie Mac:

(804) 719-1515

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Mortgage rates improved last week as unrest continued in the Middle East and investors are putting money into a safer place, the US Bond Market.

This Week; oil markets will continue to drive interest rates and the US equity markets. Crude is being driven as you know by civil tensions in an increasing number of countries in the Mideast and in N Africa. While there hasn’t been much new out of the region for the past few days, the fears continue that oil production and distribution will continue. If there is and doubt that oil supplies and oil demand are at critical melting points the recent spike in oil should alleviate and questions.

Date Time (ET) Statistic For Market Expects Prior
02/28/11 08:30:00 AM Personal Income Jan 0.30% 0.40%
02/28/11 08:30:00 AM Personal Spending Jan 0.40% 0.50%
02/28/11 08:30:00 AM PCE Prices – Core Jan 0.10% 0.00%
02/28/11 09:45:00 AM Chicago PMI Feb 67.5 68.8
02/28/11 10:00:00 AM Pending Home Sales Dec -3.20% -3.20%
03/01/11 10:00:00 AM Construction Spending Jan -0.60% -2.50%
03/01/11 10:00:00 AM ISM Index Feb 60.5 60.8
03/01/11 03:00:00 PM Auto Sales Mar NA 3.95M
03/01/11 03:00:00 PM Truck Sales Mar NA 5.64M
03/02/11 08:15:00 AM ADP Employment Change Feb 163K 187K
03/02/11 02:00:00 PM Fed’s Beige Book Mar
03/03/11 08:30:00 AM Initial Claims 02/26/11 400K 391K
03/03/11 08:30:00 AM Continuing Claims 02/19/11 3800K 3790K
03/03/11 08:30:00 AM Productivity-Rev. Q4 2.30% 2.60%
03/03/11 08:30:00 AM Unit Labor Costs – Revised Q4 -0.30% -0.60%
03/03/11 10:00:00 AM ISM Services Feb 59 59.4
03/04/11 08:30:00 AM Nonfarm Payrolls Feb 180K 36K
03/04/11 08:30:00 AM Nofarm Private Payrolls Feb 185K 50K
03/04/11 08:30:00 AM Nonfarm Private Payrolls Feb 193K 50K
03/04/11 08:30:00 AM Unemployment Rate Feb 9.10% 9.00%
03/04/11 08:30:00 AM Hourly Earnings Feb 0.20% 0.40%
03/04/11 10:00:00 AM Factory Orders Jan 2.10% 0.20%


This week the economic calendar has a lot to think about. The US economy has been on a path of recovery with almost every economic data point has been better than estimates. The new and increasingly important question now is, will consumers draw back with the price of energy expected to increase even more. Talk of $4.00 a gallon gasoline is presently dominating investor thinking. $4.00 gas will very likely lower discretionary consumer spending if in fact it occurs. Meanwhile recent economic measurements are being debated on the premise nasty weather in most of the US in Jan and Feb has distorted norms.

This is employment week; on Friday the Feb employment report is expected to have increased to 9.1% frm 9.0% in Feb, non-farm jobs +180K, non-farm private jobs +193K> if we get those numbers and just 0.2% increase in hourly earnings—-and if, there is a relaxation in the oil markets this week interest rates will likely increase. We continue our view that the only reason we have seen the recent decline in interest rates has been due to the civil unrest in the Mideast and N Africa. The week will likely be marked with continued volatility.

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