Market Reports
A Mortgage Update from Jay Skwierawski for the week of April 20
Hello Everybody!
There's a guaranteed way to partially beat inflation at the bottom of this update!
Last week wasn't a good one for mortgage rates. The good news is that the increase in rates was mostly a result of positive news on the economy, and not more bad news in the mortgage or banking industries. Some inflation talk by members of the Federal Reserve didn't help matters, either.
First, here's the news that came out:
Retail sales came out slightly higher than expected, which is a positive sign that perhaps consumers are ignoring all of the bad stuff they're reading in the papers. The Empire State Index came out much better than expected. This news on the economy in the New York area doesn't usually move markets too much, but on that day it was also reported that the Producer Price Index (PPI) for March was up a whopping 1.1% (which would be a 13% annual inflation rate) and double what was anticipated. If you a regular reader of my reports, you know how much bond traders dislike inflation. The markets sold off on this news, causing rates to rise. On Wednesday, housing starts and new house permits both came in higher than expected. Finally, some good news on the housing front, and the mortgage market sold off on the good news, causing rates to rise again. Also on Wednesday, the government reported that the Consumer Price Index (CPI - inflation at the consumer level) came in just as expected. This was a good thing. If the CPI would have come in higher, as the PPI did, then we would have seen a huge increase in mortgage rates. On Thursday, Industrial Production came in lower than expected (factories not producing as much - typical in an economic slowdown) while Capacity Utilization came in higher than expected. First time unemployment claims came in a little lower than expected, but still at a relatively high number. The Index of Leading Economic Indicators came in as expected, predicting a flat economy over the next six months. The final economic release of the week was the Philadelphia Fed Index, a measure of the economy on the east coast. Although it came in higher than expected, it was still an awful number.
All in all, the positive news on the economy won out over the negative news, and mortgage rates rose. Also hurting mortgage rates this week was some positive earnings reports released by giant companies like Google. Positive earnings reports cause people to want to invest in the stocks of those companies. So investors pull their money out of other investments, like bonds, and put it into stocks. When they pull their money out of bonds, it causes rates to go up.
By the end of the week, we saw mortgage rates rise by about 1/4% from where they started. Even though rates ticked up a little bit, it is still a great time to take advantage of historically low mortgage rates before rising inflation pushes rates higher. If you, or a friend, family member, coworker or customer is in need of any advice on the changes in the market, please have them get in touch with us.
Next week, there aren't as many market moving reports coming out. We have:
Wednesday - Existing Home Sales for March, which have a moderate impact on mortgage rates
Thursday - New Home Sales for March (Moderate)
Thursday - First time unemployment claims for last week (Moderate)
Thursday - Durable Goods Orders, which are defined as items that are durable - made to last at least three years, like autos, furniture, electronics, appliances, computers, games, etc. (Moderate)
Friday - University of Michigan Consumer Sentiment Index (Moderate)
As you will see from the chart at the top of this page, mortgage bond prices fell this week to a significant level of support - the 200 day moving average, which seems to have held, and mortgage rates have recovered for the time being. If the price had dropped below the blue line, that is often an indicator of higher mortgage rates to come. Since there isn't much market moving news scheduled for next week, we shouldn't see much happening in the mortgage markets. However, if we have more inflation talk coming out of Federal Reserve members or negative news from any large mortgage lenders or banks, we could see rates rise.
Now, how can you beat inflation, one penny at a time? Starting May 12th, the cost of mailing a 1 oz. letter goes up to 42 cents. You can still purchase the "forever" stamp for 41 cents. The "forever" stamp can be used forever to mail a 1 oz. letter. That's your way of beating inflation one penny at a time! In addition to the change in the cost of a stamp, some other changes coming at the USPS:
Express Mail - The cost will now vary depending on where the mail is going. Sending something overnight closer may be cheaper. Also, you will get a discount if you purchase postage online.
Priority Mail - You can also save on Priority Mail when you purchase postage online.
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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