Austin Mortgage Blog

Posts Tagged ‘CPI’

Enjoy the historic low Austin mortgage rates

“Regulators, mount up”! Not exactly what Warren G. had in mind when he recorded the song but fitting just the same.  Next time we see a regulator entering our building, his or her card will read, “ Joe Regulator, we regulate any stealing of his property and we darn good too, but you can’t be a geek off the street, gotta be handy with the steel if you know what I mean, earn your keep”!  Just had to have a little fun with the passing of FinReg.  As my first boss always told me, “ Change is always for the better but sometimes it takes time to see it.”

Stocks are getting pounded, down 200 on the Dow, the 10 year note is up 12/32’s, and mortgage backs are plus 4 to 6/32’s depending on the coupon. Why you ask.  First up, CPI, inflation at the consumer level fell .1% while the “core index” (ex-food and energy”, rose .1%.  Tame by any means with a whiff of deflation in the cards (slim chance in our opinion).  Michigan Sentiment Survey was the one that raised an eyebrow, falling nearly 10 points to 66.5.  Economists noted that consumers have gone into a cocoon, chaining their wallets to themselves only to be opened for necessitates.  Expect Retail Sales to soften in the future.

BP finally put a cork in their crude oil jug, a welcome site indeed. Technically, the late rally (yesterday) provided the perfect set up for a continuation pattern (further rally).  Stocks are really the major influence here.  We see this a just a move to the top of the range (2.90% 10 year note).  Any where here, current mortgage pricing or a little better is a good place for borrowers to lock in their Austin mortgage interest rates.  Any reversal in stocks will simple reverse our direction and take the market to the lower part of the range.  Enjoy the historic low Austin mortgage rates.

Slow U.S. Growth, Low Austin Mortgage Rates

Weaker than expected economic data and continued low inflation helped Austin mortgage rates move a little lower from last week. In recent weeks, investors have modified their consensus outlook to reflect weaker economic growth during the second half of the year. The manufacturing and retail sales data released during the week reinforced this view. Lending further support, the Fed revised its forecast for 2010 economic growth lower as well. Meanwhile, this week’s CPI and PPI data continued to show that inflation is not a concern in the short term. Uncertainty about the pace of the economic recovery has made investors willing to purchase safer assets such as government guaranteed mortgage-backed securities (MBS) at these relatively low yields.

Congress passed the comprehensive Financial Regulations bill and President Obama will sign it into law soon. The bill provides a framework for oversight of the financial services industry, and certain aspects of the bill will affect mortgage lending and the home buying process. The bill calls for various regulatory agencies, some of which will be newly created, to determine the details. Implementation of most of the new mortgage-related rules is expected to take 18 to 24 months to complete.

Today we see a continuation of Wednesday’s improving bond prices

Today we see a continuation of Wednesday’s improving bond prices.  Yesterday the 10 year improved in price, and this morning we have an additional 22/32s improvement.  The 10 year yield stands at 2.97, not a bad rally.  Austin mortgage pricing followed this trend, with a combined two day price improvement.   This move was spurred by a combination of factors including weak retail sales, a decent treasury auction, FOMC minutes that show downgraded revisions in growth, and this morning’s PPI number.  PPI can in at -0.5%, and the core rate, for those that don’t eat or drive, came in at +0.1%.   Tomorrow we have a few economic numbers coming out, including CPI.

Low Inflation Helps Austin Mortgage Rates

Economic data moved Austin mortgage rates this week. Slower than expected economic growth data and low inflation figures were favorable for the Austin, TX mortgage market. As a result, Austin mortgage rates ended the week lower.

Heading into a Fed meeting next week, the low inflation data released this week means there is little pressure on the Fed to begin raising the fed funds rate. May Core Consumer Price Index (CPI) inflation rose at a 0.9% annual rate, the lowest level in four decades. Usually the major task of Fed officials is to prevent inflation from moving too high, but they are now concerned about the risk that inflation will drop too low. Fed officials are most comfortable when inflation remains in the 1.5% to 2.0% range. This also means that there is little inflationary pressure to push Austin mortgage rates higher. Of course, with expectations set so low, if inflation were to surprisingly increase in coming months, it could cause a large reaction in the Austin mortgage market.

Will the “close by” deadline to receive the Home Buyer Tax Credit be extended? The answer to this question is not known as of this Friday morning. The Senate has approved an amendment to a larger bill to do so, but the larger bill is still being debated and its passage is not certain. Extending the “close by” deadline will benefit qualifying home buyers who are not able to close by June 30, the original deadline. Extending the deadline sooner rather than later would help relieve some anxiety. Right now, people in all phases of the home buying process are working very long hours to close an unusually large number of purchases before the end of the month.

Expect Austin mortgage rates to stay low for some time to come

Just when you thought the economy was doing a little better……. someone throws cold water on it. The chill came via Weekly Unemployment Claims which jumped 12K to 472K. The higher than expected claims number was largely the result of new filers from manufacturing, construction, and educational services.

Continuing Claims rose as well, up 88K on the week. CPI, inflation at the consumer level fell .2% with the core index up .1%. Just like PPI, nothing in the cards here to rattle the Fed. Philly Fed was also on tap, falling like a rock from 21.4 to 8. Employment indicators within the index did the damage, falling 1.7 points.

Last but not least, Leading Indicators rose .4% in May. Nothing special here as this index is widely treated as “rear view mirror” data and typically kicked to the curb. Overall, what is starting to take shape is a weakening situation in both housing and employment, coupled with falling consumer confidence. The BP mess doesn’t help either as the sickening scene from continued oil flowing does nothing for one’s psyche.

Market’s are red hot for bond bulls and woe is me for stock holders. Dow off 50 points has led the 10 year note higher by 20/32’s (yield 3.21%). Mortgage backs are plus 11/32’s, having a nice day as well. Technically, prices are nearing the best levels of the year (3.14% yield). Bulls will need to close below that level (3.13% or lower) to break out of the triangle pattern we’ve had in place since May. Daily oscillators however are bearish so overall, we do not have all time frames in harmony.

In English, it will become more and more difficult to improve Austin mortgage pricing/ lower yields without new fuel (catalyst). At the same time, the economic fundaments do not support higher Austin mortgage rates or worsening mortgage pricing. So, expect Austin mortgage rates to stay low for some time to come. Stay tuned for tomorrow.

Mortgage companies and loan officers telling borrowers and REALTORS they have guaranteed USDA money is plain and simple not true

Let me set the record straight on the availability of USDA funds. First of all, USDA has NOT been reallocated and will run out of money soon.  Locking in a loan does NOT guarantee a borrower will receive USDA money. Mortgage companies and loan officers telling borrowers and REALTORS that THEY have guaranteed USDA money is plain and simple not true.  The only way to guarantee a loan from USDA is to have USDA approve the loan and issue the certificate. USDA approval can only happen once the mortgage company approves first, and then sends the loan to USDA for approval.  I have received emails from loan officers who read my blog. They are adamant that USDA funds are still available to guarantee their customers. I will take the high road with this program and let the other guy be the one explaining to the REALTOR and borrower that USDA ran out of funds despite being told otherwise.  Disappointing your customer will be multiplied by 10.  Telling the truth will earn you respect. Borrowers still MIGHT be able to get a USDA loan, but I would never guarantee a loan program that is likely to run out of funds before closing.

CPI, inflation at the consumer level, rose a meager .1% while the core (ex-food and energy) remained unchanged. Owner’s equivalent rent (.25% of the index) helped the core index while a drop in transportation costs (-.1%) helped the overall index.  The report was a good one, telling us that there is little to no inflation in the pipeline.  Retail Sales were also released, up a better than expected 1.6% with the ex-autos component  up .6%.  The breakdown was interesting as retail stores increased sales (primarily women’s and teen apparel) yet electronic sales fell 1.3%.  Sales of food and beverages rose .2% and as I mentioned, clothing sales jumped 2.3%.

Year on year, total retail sales are up 7.6% which looks good on the surface but digging into the details, there are concerns. One is that the majority of sales involve purchases of less than $500.00.  Probably pent up demand as sales, especially fashion have not been great since 2007.  The other question is how sustainable is this pace given our soft employment picture.

Mortgage applications for last week were on the slide as well, down 9.6% with both refi’s and purchase applications off an equal amount. A spike in interest rates combined with an under employed borrower will continue to be a challenge.  The good news here is that Austin interest rates will stay low until the recovery brings housing into the mix.  At that time, Austin mortgage rates will go up a bit but no one will care as the public will feel better about the future and homes for sale will have 3 contracts to present the first week they are on the market.  Get ready, it will happen.

As far as the market is concerned, stocks are better (up 50 on the big board), the 10 year note is off 6/32’s (yield 3.83%), and mortgage backs are off the same amount (6/32’s). Buyers have not been able to maintain overnight gains which is consistent with a trendless market.  As we may see more range trading ahead, the overall chart picture has improved on both the market profile and slow stochastics metrics.  The improvement we see in a number of studies will keep us in the neutral/bullish camp for the time being.

Austin Mortgage Market Update – For the week of April 12, 2010

For the week of April 12, 2010 – Vol. 8, Issue 15

>> Austin Mortgage Market Update INFO THAT HITS US WHERE WE LIVE  Last week February Pending Home Sales blasted past consensus estimates. The National Association of Realtors (NEA) index was UP 8.2% for the month and UP 17.3% year-over-year! The NEA also released an upwardly revised long-term forecast. They now project the median price for existing homes to be UP 2.7% to $177,200 for 2010, then UP 4.3% to $184,800 in 2011. They also put the median price for new homes UP 2.7%, to $221,700 for 2010, then UP 5.1% to $233,100 in 2011. Interestingly, a separate monthly survey of MLS data in 26 markets found the median for-sale price of homes UP 1.07% in March, to $263,753. A new national Fannie Mae survey on housing attitudes revealed 65% of Americans still prefer owning a home, in spite of the economic situation we’ve experienced. Fannie Mae CEO Mike Williams said: “… Americans continue to value homeownership and think about their homes in ways that go much deeper than the financial investment.” He further reassured us, ”The public also strongly believes in the importance of upholding the financial commitment involved…even during these challenging times….” >> Review of Last Week SIX IN A ROW… That’s how many weeks in a row stocks have finished UP, as investors clearly see signs the economy is recovering, if not quite taking off just yet. We’ll soon have first quarter corporate earnings reports coming in and the expected profit gains should keep things going in the right direction. The week began on a positive note as investors digested the March Employment Report that came out the previous Friday. Those numbers revealed the net payroll gain for March was 224,000, when you added in the 62,000 jobs from the upward revisions to January/February. This wasn’t a one-month spike, either. Civilian employment (a reading that includes self-employed and new start-up businesses) has grown 452,000 per month the last three months. The diffusion index showed 60% of industries added to March payrolls, indicating a broad-based jobs recovery. Finally, the unemployment rate stayed at 9.7% because the labor force grew at a super-fast 2.9% annual rate the last three months. When that returns to its normal 1% growth rate, unemployment is expected to trend downward. Also on Monday, the March ISM Non-Manufacturing index blasted past expectations, hitting a 55.4, its highest level in almost four years. This was followed by the above-mentioned Pending Home Sales number that also zoomed past expectations. Finally,auto and light truck sales hit an 11.8 million annual rate in March, UP 21% over a year ago. For the week, the Dow headed UP 0.6%, to 10997.35; the S&P 500 was UP 1.4%, to 1194.37; while the Nasdaq went UP 2.1%, to 2454.05. Bonds ended the week in reasonably good shape, with some well-received large auctions keeping prices supported through the week. The FNMA 30-year 4.5% bond we watch wound up ahead 22 basis points for the week, closing at $99.69. Average mortgagerates moved up again last week, as reported in Freddie Mac’s survey, though they still remain at attractive levels — for now! >> This Week’s Forecast WILL PRICES GO UP AS HOMES GO UP?…  We’ll see the March Consumer Price Index (CPI) on Wednesday, which tells us if prices are on the rise. This of course could send the Fed Funds rate up, but so far inflation has remained in check. To see how many homes are going up, the week ends with March Housing Starts and Building Permits.We also check in again on the consumer’s participation in the recovery with March Retail Sales on Wednesday. >> The Week’s Economic Indicator Calendar Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates. Economic Calendar for the Week of April 12 – April 16 Date Time (ET) Release For Consensus Prior Impact Tu Apr 13 08:30 Trade Balance Feb –$39.0B –$37.3B Moderate W Apr 14 08:30 Consumer Price Index (CPI) Mar 0.1% 0.0% HIGH W Apr 14 08:30 Core CPI Mar 0.1% 0.1% HIGH W Apr 14 08:30 Retail Sales Mar 1.1% 0.3% HIGH W Apr 14 08:30 Retail Sales ex-auto Mar 0.5% 0.8% HIGH W Apr 14 10:00 Business Inventories Feb 0.3% 0.0% Moderate W Apr 14 10:30 Crude Inventories 4/10 NA 1.98M Moderate Th Apr 15 08:30 Initial Unemployment Claims 4/10 440K 460K Moderate Th Apr 15 08:30 Continuing Unemployment Claims 4/3 4.600M 4.550M Moderate Th Apr 15 09:15 Industrial Production Mar 0.7% 0.1% Moderate Th Apr 15 09:15 Capacity Utilization Mar 73.3% 72.7% Moderate Th Apr 15 10:00 Philadelphia Fed Index Apr 20.0 18.9 HIGH F Apr 16 08:30 Housing Starts Mar 610K 575K Moderate F Apr 16 08:30 Building Permits Mar 626K 637K Moderate F Apr 16 09:55 Univ. of Michigan Consumer Sentiment Index Apr 75.0 73.6 Moderate >> Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months  Economists are clearly not looking for an increase in the Fed funds rate near term, but sentiment is building for a hike in the second half of the year, perhaps as early as August. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same. Current Fed Funds Rate: 0%–0.25% After FOMC meeting on: Consensus Apr 28 0%–0.25% Jun 23 0%–0.25% Aug 10 0%–0.25% Probability of change from current policy: After FOMC meeting on: Consensus Apr 28 <1% Jun 23 7% Aug 10 25%

A mortgage price change for the worse is right around the corner

CPI, inflation at the consumer level, was unchanged for February with the core index up .1%.  Moderating energy prices along with a weak jobs market and not so confident consumer sentiment has made the inflation picture a non issue.  Weekly Unemployment Claims were also released, falling 5K to 457K.  Continuing Claims jumped another 12K but the most startling print came via the number of people who have used all their traditional benefits and are now collecting extended payments.  That number jumped 352K.

Leading Indicators for the month of February were also on the docket, rising .1% but still point to a slow recovery.  Only 4 of the 10 components showed signs of improvement.  Last but not least was the Philly Fed Survey which improved 1.3 points to 18.9. However,  New orders declined from 22.7 to 9.3 and Capital Expenditures fell from 16.3 to 9.7.  The news does not bode well for business investment in the first quarter.  I’m going to cut this short as the market is starting to slip.  Currently, the 10 year note is off 9/32’s (yield 3.68%) and mortgage backs are off 4/32’s.  A mortgage price change for the worse is right around the corner.  More in a few.

The spike in Austin mortgage rates and worsening prices will be worked into the system until we find a new MBS buyer/buyers to replace Uncle Sam

New day, same story.  Mortgage backed securities are getting a dose of the “new normal”.  The point here is that the Fed has been buying MBS for the past 14 months, starting at an average of 100 billion a month and then tapering off to 50 billion a month.  Within this process, they (Fed) has bought the majority of the new issue MBS and now owns 20% of outstanding MBS paper.  That part of this Quantitative Easing process will end soon (end of March).  That said, the street is being overwhelmed with mortgage paper by originators, servicers, and portfolio types that make this their business.

The spike in Austin mortgage rates and worsening prices will be worked into the system until we find a new MBS buyer/buyers to replace Uncle Sam.  The other part of this market “two step” happened yesterday after the stock market closed.  That’s when the Fed raised the Discount Rate.  For the record, the Discount Rate is the interest rate charged to commercial banks and other depository institutions on loans they receive from the Federal Reserve Bank lending facility, the discount window. Usually, these loans are extended to commercial banks, etc. for a short period of time.  The move was technical in nature but does start the ground work for monetary policy changes to remove Quantitative Easing measures put in place over a year ago.

Earlier today, CPI, inflation at the consumer level, hit the tape plus .2% with the core index (ex-food and energy) down .1%.  The print was better than expected and points to inflation well under control.  Market action was positive for the 10 year note and MBS post CPI with mortgage backs unchanged to up a tick or two.  That mini rally quickly faded as mortgage players entered the market, selling on the reality of my opening few lines.  Currently, the 10 year note is off 1/32^nd to yield 3.81%, mortgage backs are off 7/32’s, and stocks are plus 36 points on the big board.

The next 30 days are going to be tricky as volatility and the changing dynamics will be difficult to handicap.  Given what we know, you should error on the conservative side, locking your interest rate sooner than later.  Once this period of adjustment is priced in the system, we expect mortgage pricing to rebound (get better) as MBS product will look attractive on a yield basis and the overall economic picture will still be a concern.

Lots of first tier data this week with housing data, PPI, and CPI (inflation data) taking the top billing

After a slow, slightly bearish start, treasuries and mortgage backs have worked their way back to unchanged or slightly better on the day.  Most of the early news was not bond friendly as the Empire Manufacturing Index (New York State) jumped 8.99 points to plus 24.91.  Good news is that the number was better than consensus.  Bad news, the 6 month outlook dipped nearly 4 points.  TIC data, the index used to track Foreign purchases of our debt didn’t help either.  From November to January those across the pond cut their purchases of fixed income assets in half.  That was evident in last week’s Refunding auctions which were not well received.  Simply put, no one wants to extend duration in their portfolio’s as navigating the markets been one tricky adventure.  NAHB, the Home Builders Market Index was the last of today’s data, posting a plus 2 point rise to 17.  First time tax credits (the 8K wonder check) and steady traffic in builder models seem to have pushed the number.

Just out, comments by Minneapolis Fed Governor Kocherlakata that U.S. political uncertainty is problematic for future growth, inflation is relatively tame, and the jobless outlook in not comforting (sees above 9% throughout 2010) have all combined to lower yields and improve mortgage pricing a couple of 32’s.  Nothing huge but certainly better than 7:30 this morning.  Lots of first tier data this week with housing data, PPI, and CPI (inflation data) taking the top billing.  Best to stay a little defensive and keep an eye on the “Headlines.”