Mortgage rates have declined, prompting an increase in mortgage applications for both purchases and refinances.

Mortgage rates have declined, prompting an increase in mortgage applications for both purchases and refinances.

The Federal Open Market Committee dropped an unexpected gift on the stock market and mortgage markets when they announced on Wednesday that they will not be cutting back on the government stimulus program at the present time.  Virtually everyone in the mortgage, real estate and stock markets all believed for sure that this meeting is when the stimulus cutting announcement would come based upon the continual overall improvement of economic conditions.  The Fed stated that although the economy continues to improve they feel that there are still too many questionable factors as to whether the economy can sustain continued growth.

Economic reports as of late have been a little more mixed than they had hoped for or anticipated.  The FOMC feels that engaging in pulling back the stimulus program at this time would negatively hurt employment as well as cause consumers to retreat back into not spending as the cost of borrowing would increase with the cutting of the stimulus program.

The stock market rallied on the news to reach new heights were as mortgage rates declined on the news prompting a sigh of relief from consumers thinking about refinancing.  Even before the Fed announcement, mortgage rates have declined over the last week prompting an increase in mortgage applications for both purchases and refinances.  The Mortgage Bankers Association reported that applications for purchases increased 3% whereas refinances jumped 18%.

Some of the data that kept the Fed from slowing the stimulus program is that housing starts rose in August but only because July was revised down. Recent indications show signs that the housing market may be slowing down.  Housing starts in in August advanced 0.9 percent after rebounding 5.7 percent in July.  The main gain in starts was led by single-family homes which increased 7.0 percent after declining 3.0 percent the prior month.

Existing home sales reported their best showing since the beginning of the recovery at an annual rate of 5.480 million in August which was well above most analyst’s expectations.  The gain of 1.7 percent comes on top of July's giant 6.5 percent surge when "panic" over rising rates moved buyers into the market.

The National Association of Realtors (NAR) used the word "panic" in the July report and is warning that August numbers may be skewed higher by nervous buyers. Concerns exist that because of rising mortgage rates housing may begin slowing in the coming months.  This is one of the factors the Fed took into consideration in deciding to hold off on cutting the economic stimulus program.  Additionally, another factor holding down sales is the lack of homes available for sale on the market.  Current inventory on a national basis is 4.9 months down from 5.0 and 5.1 months in the two prior months.

JJ Mack
916-517-1800 x 300
jj.mack@apmortgage.com
www.apmcroseville.com

Great signs for economic recovery!

Great signs for economic recovery!

Mortgage rates are rising again.  Although we are not experiencing large increases in a single day, there is certainly a rising trend.  There have not been any major headlines that mainstream news has reported that would explain the increase, however there is some less popular economic data that reinforces the notion that the economy is continuing to improve.  An improving economy leads to an improving stock market which means investors will bail out of bonds into stock therefore driving up bond yields which goes hand in hand with mortgage rates.

The first positive report was the sale of motor vehicles.  The latest data shows a very solid 1.9 percent jump in August sales to an annual rate of 16.1 million units which is the best showing of the recovery going back to November 2007.

The ISM Manufacturing Index reported very strong growth for a second month as well.  The August report came in higher than expected and this follows a very strong July report.  Two consistent months of strong manufacturing growth is a great sign for economic recovery.  The ISM Index is at the highest point in the last 2.5 years.

Thursday’s ADP report showed a slowing rise for private payroll growth however the number is far from weak.  ADP reported a 176,000 private payroll increase for the month of August.  July's report was revised down to 198,000 however the numbers, although not earth shattering, continue to indicate an improving labor market.  Friday at 8:30AM the closely watched National Employment figures will be released.  Analysts are expecting the unemployment rate to remain the same at 7.4%.

First time jobless claims are continue to move lower which is yet another indicator that the labor market is improving.  First time claims for the prior week fell 9000 down to 323,000.  This level is near the lowest level since the start of the recovery.  The 4-week average is at a recovery low, down 3,000 to 328,500 from a revised 331,500 in the prior week.

The threat of the U.S, and other allies getting involved in the civil war in Syria continues to have investors on edge which explains some of the larger than normal market swings over the past week.  Overall the stock market has been weak however it doesn’t seem to be so weak that investors are bailing out of stocks and jumping into the bond market.  Since bond yields have been rising investors are having a tough time deciding where to place their money right now.

In other non-market shattering news, Apple announced they will have a new product launch next week.  It is expected that the Iphone 5S will be released but there is little information on what enhancement the product has over the current model.  It is amazing how well Apple can keep things a secret.

JJ Mack
916-517-1800 x 300
jj.mack@apmortgage.com
www.apmcroseville.com