Mortgage Market Update - 9/17/2010

I think the majority of the economic analysts and market prognosticators (sorry this is a big word for me) need to jump on a plane and head straight to Las Vegas. For the first time in as long as I can remember, almost every single economic forecast for the week was nailed on the head.
For many months you have been reading from me how I wonder where these economists and analysts get their weekly predictions from since week after week, they are not only way off the mark, some of them are in another world. Well... this week I take my hat off to them. (Next week will tell if this was a fluke, or maybe these experts have started finally asking people that actually know about the markets what is happening)
Although there was quite a bit of economic news this week, since the reports came in close to expectations, market movement was somewhat subdued. The economic reports this week have confirmed that the economy is indeed recovering. Although the recovery is very slow, this week's reports coupled with last week, have many believing, finally, that a recovery is taking hold.
• Retail Sales came in slightly higher than expected showing that consumers are spending money, not crazy money, but none the less, people are returning to the stores.
• Industrial Production rose .2% in August which was in line with expectations. Although the increase was less than previous months, that is being attributed to the changeover of the production plants in the automotive industry for the launch of the 2011 model year.
• Weekly Jobless Claims dropped once again giving life to the notion that companies are becoming more stable. We still have a long way to go with unemployment however the continuous weekly drops are very refreshing to see.
• The Producer Price Index was up slightly higher than expected. Experts were predicting a rise of .3%, however the report showed an increase of .4%. This slightly higher report did not impact markets because the numbers continue to indicate that inflation on the wholesale level is still very much under control.
With the continuing trend of stable economic reports, interest rates for mortgages are continuing to rise slowly. Over the last month we have seen mortgage rates increase and that is now starting to impact mortgage applications negatively.
The MBA reported that mortgage applications for refinances and purchases both dropped once again. Although mortgage rates are still incredibly, if not ridiculously low, every time there is an increase in rates, regardless of how small, we see mortgage volume drop. Last week purchase applications dropped .4% and refinance applications decreased by a larger than expected 10.8%.
Let's call next week "Housing Week". In addition to all of the regular economic news due out, next week we are going to be hearing a lot about housing. Be prepared in that if the trend of housing continues to improve, mortgage rates will jump. Also keep in mind that in recent months, the experts have been far off on most of their predictions and that can lead to strong reactions to any reports that come in that are not in line with expectations.
• Monday September 20th - Housing Market Index
• Tuesday September 21st - Housing Starts and FOMC Meeting Announcement
• Wednesday September 22nd - MBA Mortgage Applications, FHFA Housing Price Index
• Thursday September 23rd - Weekly Jobless Claims & Existing Home Sales
• Friday September 24th - New Home Sales and Durable Goods Orders

Your Mortgage Consultant,

JJ Mack
916-517-1800