Market Reports
A Mortgage Update from Jay Skwierawski for the week of May 19
Hello Everybody!
Apparently someone from FNMA read my "Mortgage Minute" on declining markets this week, because they've changed their policy! Well, maybe not, but more on that later.
Mortgage rates finished the week slightly lower than where they were when the week started. News out on the economy was mixed, as far as mortgage rates are concerned. Here's a recap:
The Retail Sales figures announced on Tuesday were mixed, with the headline number coming in at -.2%, just as expected, but Retail Sales excluding autos came in much better than expected at +.5%. Both of these numbers have a HIGH impact on mortgage rates. On Wednesday, the Consumer Price Index (CPI) and the Core CPI (excluding food and energy costs) came in lower than expected. For the inflation hating bond markets, these lower than anticipated numbers were a welcome sign. Thursday brought a higher than expected number for first time unemployment claims, a worse than expected Empire States Index (showing a downturn in manufacturing in NY), and a slightly better than expected Philadelphia Fed Index. Also released on Thursday were Industrial Production and Factory Utilization, both coming in worse than expected. Finally, on Friday we found out that new housing starts and new housing permits both came in higher than expected - does this mean that our housing problems have "bottomed out"? Hopefully, however also released was the most recent measure of consumer sentiment from the University of Michigan, showing the lowest number in 26 years. A rally in bonds on Friday fizzled as the price of oil reached $128 per barrel. This completely took the wind out of the bond market's sails, and bonds ended up finishing the week very close to where they started.
Also on Friday, we heard some great news as Fannie Mae (FNMA) announced that they are revamping their "declining markets" policy, effective June 1. One thing that remains to be seen is if the PMI companies will sign on to FNMA's new policy. It won't do any good for FNMA to offer 97% mortgages, even in "declining market areas" if lenders can't obtain PMI coverage on those loans. We should hear from the PMI companies in the coming week, and as any important news is announced, we will share it with you.
Next week isn't a huge one on the news front, but recently the quiet weeks have been the most volatile for mortgage rates. Here's what we have to look forward to:
Monday - Index of leading economic indicators (expected to be flat at 0.0) Moderate Impact on mortgage rates
Tuesday - Producer Price Index (PPI) is expected to show inflation at the wholesale level rising at .4% (better than last month's +1.1%) HIGH
Tuesday - Core PPI, excluding food and energy costs, is expected to come in at +.2%, same as last month. HIGH
Wednesday - Minutes from last Federal Reserve meeting are released. The market will watch this information closely, as the Fed signaled at this meeting that they were probably done lowering rates during this current cycle. HIGH
Thursday - First Time Unemployment claims for last week. MODERATE
Friday - Existing Homes Sales is expected to show a slight decline. MODERATE
You will notice on the chart on the top of the page some pretty big swings in mortgage bonds this past week. Remember, the most recent days are to the right. Green and up are good for mortgage rates, red and down are bad!
With the good news out of FNMA, and very favorable mortgage rates, we should start seeing buyers coming into the market. We've even sited some positive articles in the press regarding housing, which should hopefully offset some of the doom and gloom that had been reported.
Have a great week!
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
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