Mortgage bond prices ended lower meaning higher mortgage rates at the end of last week as compared to the star of the week.   Spain and Portugal had somewhat successful bond auctions, which reversed the flight to quality buying of US debt instruments that helped rates fall.  Lower than expected weekly jobless claims Thursday added to the losses causing rates to spike higher.  Analysts were looking for jobless claims at 425k and the actual release showed claims at 404k.  Leading economic indicators were higher than expected with an increase of 1% compared to the anticipated 0.6% increase.

Date Time (ET) Statistic For Market Expects
01/25/11 09:00:00 AM Case-Shiller 20-city Index Nov -1.50%
01/25/11 10:00:00 AM Consumer Confidence Jan 53.5
01/25/11 10:00:00 AM FHFA Housing Price Index Nov NA
01/26/11 10:00:00 AM New Home Sales Dec 300K
01/26/11 02:15:00 PM FOMC Rate Decision Jan 0.25%
01/27/11 08:30:00 AM Initial Claims 01/22/11 410K
01/27/11 08:30:00 AM Continuing Claims 01/22/11 3835K
01/27/11 08:30:00 AM Durable Orders Dec 1.50%
01/27/11 08:30:00 AM Durable Orders ex Transportation Dec 0.60%
01/27/11 10:00:00 AM Pending Home Sales Nov -0.50%
01/28/11 08:30:00 AM GDP-Adv. Q4 3.70%
01/28/11 08:30:00 AM Chain Deflator-Adv. Q4 1.50%
01/28/11 08:30:00 AM Employment Cost Index Q4 0.40%
01/28/11 09:55:00 AM Michigan Sentiment – Final Jan 73.2

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This week is busy in terms of economic data scheduled for release and will likely be an active week for mortgage rates. The number of releases is actually irrelevant due to the importance of the some of the reports. There are seven economic releases scheduled for the week in addition to the first Federal Open Market Committee (FOMC) meeting of the year and two potentially influential Treasury auctions. All but one of them are considered to be of moderate or high importance, meaning we should see quite a bit of movement in mortgage rates this week.

Tuesday Morning kicks off this busy week of economic reporting with the release of January’s Consumer Confidence Index (CCI) late Tuesday morning. This report is considered to be of importance to the bond market and may have a significant impact on mortgage rates. Waning confidence in their own financial situations usually means that consumers are less willing to make large purchases in the near future. Since consumer spending makes up two-thirds of the U.S. economy, market participants are very attentive to related data. Analysts are expecting to see an increase from December’s reading, indicating a higher level of consumer confidence. A reading much smaller than the expected 53.5 would be ideal for the bond market and mortgage rates.

10:00 AM Wednesday will be the release of December’s New Home. It is considered to be the sibling release to last week’s Existing Home Sales. Wednesday’s release is forecasted to show an increase in sales of newly constructed homes, but is not important enough to heavily influence mortgage pricing unless it varies greatly from forecasts.

Also Wednesday is this year’s first FOMC meeting results. It will begin Tuesday and adjourn at 2:15 PM ET Wednesday. It is expected to yield no change to short-term interest rates, but as is often the case, traders will be looking for any indication of the Fed’s next move and when they may make it. I believe that there is little chance of indicating a possible rate hike in the near future, but any hints of a change in theories or timetable by the Fed will cause afternoon volatility in the financial and mortgage markets.

Thursday morning brings us the release of December’s Durable Goods Orders. This data helps us measure manufacturing strength by tracking new orders at U.S. factories for products that are expected to last three or more years, also known as big-ticket items. The data often is quite volatile from month to month, but is currently expected to show an increase in orders of approximately 1.5%. A smaller than expected increase would be considered good news for bonds and mortgage rates, but a slight variance likely will have little impact on Thursday’ s mortgage pricing.

Three reports are scheduled for release Friday. The first of them is arguably the single most important reports that we see regularly. The initial reading of the 4th Quarter Gross Domestic Product (GDP) will be posted early Friday morning. This data is so important because it is considered to be the best measurement of economic growth. The GDP itself is the total sum of all goods and services produced in the United States. Its’ results usually have a major impact on the financial markets and can cause significant changes in mortgage rates. There are three readings to each quarter’s activity, each released approximately one month apart. The first reading, which usually carries the most significance, is expected to be an increase of 3.8%. A noticeably weaker reading would be great news for the bond market, questioning the pace of the economic recovery. That would likely fuel stock selling and a rally in bonds that would push mor tgage rates lower Friday morning. However, a stronger than expected reading would probably lead to bond selling and higher mortgage rates.

The 4th Quarter Employment Cost Index (ECI) is also scheduled for release early Friday morning. It measures employer costs for employee wages and benefits, giving us an indication of the threat of wage inflation. It usually has more of an effect on the bond market than the stock markets. Current forecasts are showing an increase of 0.4%. A lower than expected reading would be favorable to bonds and mortgage rates, but the GDP reading will be the biggest influence on trading and rates Friday morning.

The last report of the week is the revised reading to the University of Michigan’s Index of Consumer Sentiment. This index is another measurement of consumer confidence, which is thought to indicate consumer willingness to spend. I don’t see this data having much of an impact on the markets or mortgag e rates due to the importance of the GDP and ECI readings.

And if we didn’t have enough to watch already, there are two relatively important Treasury auctions for the markets to digest. The Fed will auction 5-year and 7-year Treasury Notes Wednesday and Thursday, respectively. If they are met with a strong demand from investors, the broader bond market may rally during afternoon hours those days. However, a lackluster interest in the sales could lead to bond selling and higher mortgage rates.

Look for Wednesday or Friday to be the biggest days for mortgage rates. Friday’s GDP is the single most important piece of data this week, but we may see quite a bit of movement in rates Wednesday afternoon. If we see weaker than expected results from the most important reports, mortgage rates should close the week lower than last Friday’s closing levels. If the data shows stronger than expected results, we may see mortgage rates move h igher for the week. This is of course, assuming that the Fed meeting doesn’t reveal any surprises. I strongly recommend that fairly constant contact is maintained with your mortgage professional this week if still floating an interest rate.

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Consider Locking.

Dec 3, 2010

Mortgage rates have steadily risen this week. Reasons for this include the US agreeing to help bail out Europe and consumers suffering from “recession Fatigue”

A change this morning may give home owners and buyers an opportunity to get last weeks rates as payroll data released this morning not a s strong as expected.  Those looking at refinancing in the near future should call their mortgage professional today to discuss locking.

Paul Cantor

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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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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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The House and Senate both approved H.R. 3081 which included the extension of the increased conforming loan limit in high cost areas. This extension covers conforming loans limits that are backed by Fannie Mae, Freddie Mac and FHA (Federal Housing Administration) and will be in effect through the new fiscal year which ends September 30, 2011.  The maximum amount of conforming and FHA loans will remain as high as $729,750.  Here are some of the conforming loan limits in Virginia:

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Richmond City MSA $528,750
Washington DC Metro $729,750
Charlottesville MSA $425,000
Winchester MSA $475,000
VA Beach/Norfolk MSA $428,750

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It is expected that President Obama will sign the legislation.

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www.paulcantor.info

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Mortgage Market Review

Sep 27, 2010

Mortgage rates ended last week pretty much unchanged from the beginning of the week.  As expected the Fed left rates unchanged and want to keep rates low for some period of time.  Mortgage bonds gained some ground in the mid week, which was lost due to some positive data and a rising stock market.  Generally speaking, stock market strength makes bonds less appealing to investors and leads to higher mortgage pricing.

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This Week:

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Date Time (ET) Statistic For Market Expects Prior
09/28/10 09:00:00 AM Case-Shiller 20-city Index Jul 3.30% 4.23%
09/28/10 10:00:00 AM Consumer Confidence Sep 53 53.5
09/29/10 10:30:00 AM Crude Inventories 09/25/10 NA 0.970M
09/30/10 08:30:00 AM GDP – Third Estimate Q2 1.60% 1.60%
09/30/10 08:30:00 AM GDP – Deflator Q2 1.90% 1.90%
09/30/10 08:30:00 AM Initial Claims 09/25/10 457K 465K
09/30/10 08:30:00 AM Continuing Claims 09/18/10 4450K 4489K
09/30/10 09:45:00 AM Chicago PMI Sep 56 56.7
10/01/10 08:30:00 AM Personal Income Aug 0.30% 0.20%
10/01/10 08:30:00 AM Personal Spending Aug 0.30% 0.40%
10/01/10 08:30:00 AM PCE Prices – Core Aug 0.10% 0.10%
10/01/10 09:55:00 AM U MI Consumer Sentiment – Final Sep 67 66.6
10/01/10 10:00:00 AM Construction Spending Aug -0.50% -1.00%
10/01/10 10:00:00 AM ISM Index Sep 54.8 56.3
10/01/10 02:00:00 PM Auto Sales Sep 3.8M 3.7M
10/01/10 02:00:00 PM Truck Sales Sep 4.9M 4.96M

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This week the bond and mortgage markets don’t have much data to look at until the end of the week; in the meantime Treasury will borrow $100B in 2 yr notes, 5 yr notes ands 7 yr notes on Monday through Wednesday. Interest rates on treasuries declined last week when the Fed said it would do more quantative easing to keep the economic recovery moving, if necessary. Markets jumped on the statement as if it is reality. Stock investors drove the DJIA up 253 points, sent the 10 yr note yield down 14 basis points in rate to 2.62%, while mortgage rates held generally unchanged.

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This week’s data has consumer confidence, the final Q2 GDP expected unchanged from previous reports at +1.6% growth, weekly jobless claims on Thursday expected to hold steady but down about 8K. Claims still hovering in the 450K a week range. Friday the critical Sept ISM manufacturing index is expected top have declined a little, from 56.3 to 54.5; the ISM report is one of the month’s more critical. With the Fed poised for more easing the 10 yr note, driver for mortgage rate direction, is likely to run out to test the low rate set back in August (25th) at 2.45%, trading at 2.62% at the end of last week. Mortgage rates however, are not likely to move much lower until the 10 yr can break into new low rates and that will require actual Fed easing. The elections so far haven’t had much impact on the bond market, but as the calendar ticks off investors will likely become a little more edgy—-both bullishly and bearishly

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On the heels of the disappointing existing home sales numbers yesterday, sales of new homes reach new low last month.  Other data pointing to a no-recovery is the orders for durable goods lower than anticipated.
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www.paulcantor.info

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We have some stating that inflation may be hitting sooner than expected.  This would mean higher mortgage rates.  Although nobody knows where the bottom of the rate will / have hit, their is no question that mortgage rates are at near all time lows and home owners and home buyers should take advantage of these.  Home affordability is very high.  It is better to buy than to rent.

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Inflation, not deflation, Mr. Bernanke Caixin Online

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www.paulcantor.info

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