The stock market rebounded nicely from its early week low's due to the strengthening Euro which has been beaten down over the last few weeks. The European debt crisis has been the primary reason for the devaluation of the currency and now that it seems like some stability is coming to the region, the Euro is gaining ground against the dollar.
Overall mortgage rates rose slightly for the week however nothing significant. The Mortgage Bankers Association reported that purchase applications dropped for the 4th straight week. This past week they fell 5.7% and overall in the last 4 weeks they are down 35%. Without question the expiration of the tax credit is having a major impact on housing.
Additionally, the MBA reported that refinance transactions have also dropped slightly despite interest rates being very low. Without a question, uncertainty in the economy and housing are continuing to slow home buyers, and even homeowners from taking action on financing for their current home.
It was reported on Thursday of this week that the number of foreclosure filings has dropped 3%. However what is very disturbing news is that the banks have significantly increased their repossessions of properties. In May, a new record was set for bank repossessions at 93,777.
The 10YR Treasury auction this week had modest demand. Given the uncertainty in the stock market, many are still investing in the safe haven of government securities.
In other news, Ben Bernake spoke a few times this week and has indicated that inflation continues to remain a non-issue and that he expects the Fed to keep rates the same possibly through 2012. However if inflation does begin to rear its ugly head anytime before, the Fed will certainly act to keep it under control by raising interest rates.
New filers for unemployment rose for the 4th straight week which once again exceeded analyst expectations. The perceived good news in the employment report is that continuing unemployment claims dropped a very large 225,000. The big question that remains is "are employers starting to hire, or is the drop related to many people becoming no longer eligible for benefits and they are being dropped from the calculations?" (I have my own opinion but I will let you draw your own conclusion about this)
Retail Sales unexpectedly dropped 1.2% in May, signaling consumers are focusing on boosting savings as the employment picture slowed and the stock market has been falling. Most of the economists surveyed expected a rise of .2%. Many experts believe that retail sales growth will be minimal in the coming months as signs of recovery are slower than anticipated.
News on tap for next week:
• Wednesday June 16th - Mortgage Bankers Association Purchase Applications
• Wednesday June 16th - Housing Starts, Industrial Production, Producer Price Index
• Thursday June 17th - Jobless Claims and Consumer Price Index
• Friday June 18th - Quadruple Witching Day which may lead to tremendous market volatility
Your Mortgage Consultant,
JJ Mack
916-517-1800
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