Austin Mortgage Blog

Posts Tagged ‘economic data’

Probability of a worsening Austin mortgage price change is gaining

Stocks are ok, trading between flat and plus 50 on the Dow (currently up 35).  The 10 year is behaving, down only 1/32^nd but mortgage backs are widening.  Probability of a worsening Austin mortgage price change is gaining.  Nothing huge, just volatile.  Home builders confidence did nothing to help the economy, slipping to levels not seen since early 2009.  The economic data week ahead is light with Housing data tomorrow and Weekly Claims/Housing on Thursday.  As I mention late last week, borrowers should be careful as the market continues to churn on headlines from out of the blue!

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.

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.

Jobs Report Falls Short

The big economic news this week was Friday’s Employment data, which fell short of Wall Street forecasts and pushed mortgage rates lower. Investors continued to watch the situation in Europe, but there were no major market moving developments. Due to a rally on Friday, mortgage rates ended the week lower.

The May Employment report revealed the largest monthly increase in jobs since March 2000, but nearly all of the gains came from the hiring of temporary census workers. Without the census workers, the data fell short of expectations. A total of 431K jobs were added in May, below the consensus forecast of 500K. 411K jobs came from census hiring, leaving a net gain of just 20K jobs when those workers are excluded. The Unemployment Rate dropped to 9.7% from 9.9% in April, but this was mostly due to people dropping out of the labor force. Investors had expected stronger results from private sector job growth, and the stock market fell after the news. Weak labor market figures generally lead to lower inflation and are favorable for mortgage markets.

The news from the housing sector was more positive. April Pending Home Sales rose 6% from March, which was stronger than expected, to the highest level since October 2009. Pending sales are a leading indicator of future housing market activity. The April 30 expiration of the homebuyer tax credit likely pulled some pending sales forward which otherwise might have taken place later in the year. The benefits, though, of extremely low mortgage rates and very affordable home prices are in place to promote home buying activity even without the homebuyer tax credit.

With Austinmortgage rates near their best levels, the prudent move is for Austin homebuyers and Austin refinances to lock in their interest rates

With Austinmortgage rates near their best levels, the prudent move is for Austin homebuyers and Austin refinances to lock in their interest rates. The employment report is the most volatile, highest profile piece of economic data in the field and with the market looking for a strong number, the probability that Austin mortgage pricing will be worse this time tomorrow is high.  We do not see a huge selloff coming as the Euro zone influence will support the market but a print of 600K new jobs will turn some heads.

Markets are in set up mode for tomorrow’s May Employment Report.  We will preview this for you later today.  Earlier, the economic data provided a mixed bag.  Claims fell a bit but last weeks were revised higher.  Factory Orders rose but were weaker than expected.  Stocks opened the day on the plus side but as has been the pattern of late, quickly faded and are now off 46 on the big board.  Notes and mortgage backs were under pressure from the open with the 10 year off 16/32’s and MBS down 3/32’s.  The note has since cut its losses in half while MBS are off 1 to 2/32’s.

China Reassures about European Debt

The economic data took a backseat to events in Europe again this week. Improved sentiment about the troubles in Europe influenced the willingness of investors to purchase riskier assets such as stocks, hurting bond markets. As a result, after dropping to the lowest levels of the year, Austin mortgage rates ended the week a little higher.

A report on Wednesday that China was considering a move to reduce its holdings of European debt rattled global financial markets. There had been speculation in recent weeks that China, with the largest pool of foreign exchange reserves in the world, might cut its exposure to European debt. Thursday, however, Chinese officials made rare public comments that China was not planning to make any changes to its portfolio of European investments. Relieved global investors responded by embracing riskier assets such as stocks and partially reversing the effects from a flight to safer assets, such as bonds and mortgage-backed securities (MBS), seen over the last few weeks.

This week’s news from the housing sector was mostly positive. April Existing Home Sales rose 8% to an annual rate of 5.77 million units, the highest level in five months. Inventories of unsold existing homes increased a little, but the median home price was 4% higher than one year ago. First-time buyers accounted for 49% of all existing home sales. April New Home Sales rose 15% to an annual rate of 504K units, above the consensus forecast of 425K, and the highest level since May 2008. The homebuyer tax credit helped boost sales before its April 30 deadline.

Austin mortgage rates declined during the week, reaching the lowest levels of the year

This week, uncertainty about the pace of the economic recovery caused investors to shift to relatively safer assets, including government insured mortgage-backed securities (MBS). Also positive for mortgage markets, the economic data released this week showed that inflation remains extremely low. As a result, Austin mortgage rates declined during the week, reaching the lowest levels of the year.

Concern about the level of global economic growth drove financial markets this week. Troubled European countries will be forced to reduce government spending, and Chinese officials indicated that they will tighten monetary policy to reduce inflation. In the US, it’s not clear to what degree the new financial regulation bill will cause banks to reduce lending, leading to slower economic growth. In response to periods of uncertainty such as this, investors seek to reduce risk by moving to safer assets such as bonds, and greater demand for MBS pushes mortgage rates lower.

This week’s news from the housing sector was mixed. April Housing Starts increased above the consensus forecast to the highest level since October 2008. Building Permits, a leading indicator, declined moderately. The May NAHB Homebuilder confidence index rose to the highest level since August 2007. Even with the end of the homebuyer tax credit, the builders surveyed remained optimistic about the next six months.

Austin Mortgage Rates Rise on Improving Economic Data

While inflation remained low, stronger than expected economic data released this week was negative for mortgage markets. As a result, Austin mortgage rates ended the week a little higher.

The big news in this week’s economic data came from the housing sector. March Existing Home Sales rose 7% from February, and existing home sales were 16% higher than one year ago. Inventories of unsold existing homes fell to an 8-month supply, from 8.5-months in February. March New Home Sales were even better, jumping 27% from February to the highest monthly rate since last July. This marked the largest single-month increase in new home sales since 1963. The chief economist of the National Association of Realtors (NAR) credited the homebuyer tax credit for the strong March housing data. Buyers must sign a contract by April 30 to take advantage of the tax credit, so the April data should benefit as well.

Friday morning, CNBC reported that support is growing among Fed officials to begin sales of mortgage-backed securities (MBS) from the Fed’s portfolio. In a program which ended March 31, the Fed purchased $1.25 trillion of MBS to help lower mortgage rates and boost the economy. According to CNBC, “at least” six members of the Fed’s policymaking committee support near-term MBS sales if the economy continues to improve. The selling could begin as soon as the third or fourth quarter of this year. Fed Chief Bernanke still views the likely time frame to begin MBS sales as next year, but his recent comments have indicated a willingness to keep more options open. With the next Fed meeting taking place on Wednesday, the 2:15 et release of its statement will take on added significance. If the Fed actually conveys an intention to begin to sell MBS soon, Austin mortgage rates would be likely to rise on the news.

Low Inflation Benefits Mortgage Markets

This week’s economic data and comments from Fed officials painted a picture of a gradually improving economy with very low inflation. March Core CPI inflation rose at a tame 1.1% annual rate. This economic environment is favorable for bond markets, and Austin mortgage rates ended the week a little lower.

While Austin mortgage rates have dropped over the last two weeks, the move lower has not been a straight line down. Austin mortgage rates have been fluctuating sharply from day to day, and even hour to hour this month. Volatility in mortgage markets has increased significantly since the end of the Fed’s MBS purchase program on March 31. With the Fed steadily in the market in just one direction (purchasing, but never selling), other investors were generally reluctant to take opposing positions. Now that the Fed is on the sidelines, the market has returned to more normal conditions, meaning that investors freely react to economic news and changing sentiment.

This week’s housing sector reflected improvement. March Housing Starts exceeded expectations, rising 2% from February to the highest level since November 2008. Housing Starts were 20% higher than one year ago. Building Permits, a leading indicator, also beat the consensus forecast. The April NAHB Homebuilder confidence index jumped to the highest level since September 2009 as home buyers take advantage of tax credits set to expire soon.

Weekly Unemployment Claims rose 24K, much higher than analysts had expected

The market was greeted with a slew of economic data this morning, some too hot, some too cold, and some just right.

Weekly Unemployment Claims filled the too cold category as the rose 24K, much higher than analysts had expected. The plus 484K reading is the highest level seen since the snowstorms in late February.  Blame has been laid on Easter and Cesar Chavez day.  Wonder what will happen to next week’s numbers since April 20^th is National Cuckoo day.

The New York State Empire Manufacturing Index was also released, up 9 points to 31.86. The print above 30 has happened only twice in the last four years.  Looks like manufacturing is getting better in the big apple, switching from a draw down in inventories to a rebuild.  Let’s see if its sustainable.  Industrial Production for March hit the screen up only .1% as utility output fell sharply but was countered by strong mining and manufacturing.  The index continues to point out that we still have plenty of slack in the economy.

Batting cleanup today was the Philly Fed Survey which rose 1.3 points to 20.2. The index was mixed as new orders were up over 4 points but shipments dropped 8 points.  The numbers were disappointing, a bit of a head scratcher when you look at the divergence between Philly and NYC.

Bond, note, and mortgage back pricing has been a game of crack the whip, initially dipping on the Empire news, making a comeback on Weekly Unemployment Claims, only to dip again on the Philly Fed news.  Currently, we’re on the comeback trail as the market has rallied for no particular reason.  After being down as much as 6/32’s this morning (MBS), the market is back to unchanged.  With cross currents and divergences a plenty, the tactical bias is to stay defensive on the market.  Traders look to sell strength but also buy weakness as we see the range (10 year note) between 3.82% and 3.92%.

Happy tax day!