Mortgage Market Update - 4/8/2011

I think I have decided that I am going to be an economic analyst or so called expert. The reason being is that they are like Weather Forecasters. Regardless of whether they are right or wrong, they are still going to get paid.
Does anyone really know which direction the economy is headed? Of course we can all look at headlines and see that economic indicators are improving. However despite this trend, this week we learned that the Fed can't even agree on the stability and growth of the economy.
The FOMC report released this week showed that in the last Fed meeting that the members were more divided in their sentiment about the economy than we have seen in a long time. Some of the members believe that sooner than later the Fed will have to start pulling back on the stimulus plan (commonly referred to as QE2) and begin raising interest rates.
Meanwhile other members believe that the economy still needs all the help it can get. Some committee members believe that stimulus will be needed well into 2012 and that any attempt to raise rates will hurt the fragile economy.
In the meantime the stock market has seemed to hit a wall. Last week I had mentioned that there are things happening all around the world that can impact the markets. Although in the U.S. we seem to be stabilizing (except the potential government shut down), unrest in North Africa, Thursday's 7.1 earthquake in Japan, and rising oil prices have many concerned that the recovery may come to a halt.
In recent weeks many economic reports have verified that the pace of the recovery is slowing. The good news is that there is still a recovery happening however slow it may be.
Mortgage rates have been rising and are up about .25% from a week ago. Purchase applications for mortgages increased 6.1% despite rising rates. The Mortgage Bankers Association believes that the main driving force for the increase is that FHA Insurance Premiums increased on April 1st and that mortgage companies were advising buyers to apply before the increase went into effect. Refinance applications dropped 6.2% which is a reflection of the rising mortgage rates and also evidence that the pool of borrowers that can still take advantage of refinances continues to get smaller and smaller.
Jobless claims continue to drop in small steps. Last week we saw that national unemployment dropped to .1% down to 8.8%. In addition, first time jobless claims are dropping little by little as well. The most promising indicator about employment is that on-going jobless claims have been steadily decreasing for many weeks now. Some believe that this is because employers are hiring people back into the work force. The "naysayers" will tell you that it is because people have given up trying to find work. I believe it is a combination of both but more so that employers are beginning to undue their hiring freezes and are once again increasing staffing.
Lastly, next week starts the corporate profit reporting season for the 1st quarter of 2011. That could play a major role in driving stocks up or down. Stay tuned...
Reports due out next week are:
• Wednesday April 13th - MBA Mortgage Applications, Retail Sales & 10 YR Note Auction
• Thursday April 14th - First Time Jobless Claims and Producer Price Index
• Friday April 15th - Consumer Price Index, Industrial Production and Consumer Sentiment

Your Mortgage Consultant,

JJ Mack
916-517-1800