Market Reports
A Mortgage Update from Jay Skwierawski for the week of January 20
A Mortgage Update from Jay Skwierawski
President of First Sterling Mortgage Services, LLC
Mortgage Update the Week of January 20
Hello Everybody!
This was a good week for interest rates, and long term mortgage rates appear to be headed lower. Will they reach the historically low levels that we saw earlier this decade? That remains to be seen, but it sure is looking that way! Here's a recap of the news that came out last week:
Tuesday's News:
Retail Sales, which were expected to be flat for the month of December, actually came in lower than expected. That doesn't bode well for an economy that relies on consumers to spend, spend, spend. The Empire State Index, which shows how the economy is in New York, also came in lower than expected. The Producer Price Index (PPI), which shows the cost of goods on the wholesale level, came in down .1%, which was lower than the expected increase of .2% and MUCH LOWER than last month's increase of 3.2%. The "Core" PPI showed wholesale prices, excluding food and energy costs, came in as anticipated at .2%, which is a fairly tame number.
Wednesday's News:
Wednesday brought the release of the Consumer Price Index (CPI) - the cost of goods at the consumer level. The CPI came in at up .3%, which was a little bit higher than the anticipated up .2%, but MUCH LOWER than last month's increase of .8%, and the Core CPI came in at up .2%, as expected. Capacity Utilization and Industrial Production both came in slightly higher than expected.
Thursday's News:
New housing starts came in much lower than expected, showing the largest drop in new housing starts in three decades. Permits for new homes also came in much lower than expected, which means future housing start numbers may be bleak. First time unemployment claims came in lower than expected, and the Philadelphia Fed Index came in MUCH LOWER than expected.
Friday's News:
Finally, on Friday, we saw the index for Leading Economic Indicators (LEI) come in lower for the third month in a row. The LEI is an indicator of how the economy is going to be six to eight months out. Consumer Sentiment came in higher than expected.
So, what does it all mean? The news was a fairly mixed bag of good and bad. Interest rates went up one day, and then down the next, and finished the week slightly lower than where we started. That was good. The news on retail sales and housing were both pretty bad for the economy, and may point to the U.S. heading into a recession. During the week, we had the Chairman of the Federal Reserve testifying before Congress that there should be some sort of stimulus package to help the economy avoid a recession (if it's not too late) or to help us get out of one (if it is too late). Then, the President made a proposal that would have every taxpayer receiving a check for $800 and every family receiving a check for $1,600. The idea being that everybody will go out and spend those checks and rev up the economy. This has worked in the past, but is it enough to help housing? I don't think a $1,600 check is going to help those sub-primer borrowers who have fallen behind on their mortgages. It's also not going to be enough to convince fence-sitters to go out and buy a new home. What's going to help them is lower interest rates. I had been predicting since last Spring that we would see rates fall firmly below 6% by this spring, and that has happened. Now I am ready to make a bolder prediction! I think we may see rates hit the historically lower levels that we saw in the beginning part of this decade. That would put the 30 year fixed rate, conforming mortgage, in the 5 - 5.25% range. Now, THAT should get things moving. Stay tuned to see if I am right!
Next week there is very little in the way of news out on the economy. The only releases on the calendar are Existing Home Sales and Weekly First Time Jobless Claims - both due out on Thursday. Of course, other news will develop that will move mortgage rates, and as it comes out, I will update you on it.
If you, or somebody you know, currently has a mortgage with an interest rate higher than 6.25%, or an adjustable rate mortgage that will be adjusting soon, you should contact us for a free, no obligation analysis of your current mortgage situation. If you've been thinking about moving, but thought that rates were too high, now may be the best time to contact us to see how today's near-historically low mortgage rates can increase your purchasing power.
Finally, I would like to welcome the following new additions to our staff:
Matt Lissner - Loan Officer working out of the Lincoln Park office
Richard Pearlman - Loan Officer working out of the Lincoln Square office
Cindy Smolin - Loan Officer working out of the Northbrook office
Other new hires to be announced soon!
Thank you!
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, Suite 1900
Chicago, IL 60611
312.268.7601
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