Brian Leavitt

Rate Advisory for February 19, 2010

Thursday's bond market has opened in negative territory again following stronger than expected inflation news. The stock markets are showing gains with the Dow up 18 points and the Nasdaq up 6 points. The bond market is currently down 9/32, which will likely push this morning's mortgage rates higher by approximately .375 of a discount point.

The Labor Department reports that January's Producer Price Index (PPI) rose 1.4% while the core data reading rose 0.3%. Both of these readings were well above forecasts, meaning inflationary pressures were stronger at the producer level of the economy than many had thought. This is certainly bad news for the bond market and mortgage rates because inflation erodes the value of a bond's future fixed interest payments, making them less appealing to investors. They are then sold at a discount, leading to higher yields and rising mortgage rates.

The Conference Board gave us January's Leading Economic Indicators ( LEI) late this morning. They announced a 0.3% increase that was below expectations. That means that the data is predicting a slower pace of economic growth over the next several months than the markets were expecting. This can be considered good news for bonds, but this data is not nearly important to the markets than the PPI reading was.

Yesterday's afternoon release of the FOMC meeting minutes didn't reveal many surprises. The most notable was a minor upward revision of their expectation for this year's unemployment rate. They also reiterated a prolonged period of high unemployment and slightly raised inflation targets for this year. But the news was not welcomed in the bond market and is likely contributing to today's selling, especially after this morning's stronger than expected inflation readings.

The Labor Department will be in the forefront again tomorrow when they post the more important Consumer Price Index (CPI) for January. This index measures inflationary pressures at the very important consumer level of the economy compared to today's release that measured the producer level. With exception to maybe the Employment report, the CPI is the most important report that we see each month. Its results can have a huge impact on the financial markets, especially on long-term securities such as mortgage-related bonds. It is expected to show a 0.3% increase in the overall index and a 0.1% rise in the more important core data. If we see weaker than expected readings, bond prices should rise and mortgage rates would likely fall. However, after today's PPI results, traders may be skeptical of getting favorable results tomorrow.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Lock if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Rate Advisory for Tuesday February 16, 2010

Tuesday's bond market has opened in negative territory due early gains in stocks. The stock markets are kicking-off the holiday shortened week with noticeable gains. The Dow is currently up 50 points while the Nasdaq has gained 7 points. The bond market is currently down 7/32, which will likely push this morning's mortgage rates higher by approximately .125 of a discount point over Friday's morning rates.

There are five economic reports worth watching this week that are likely to affect mortgage rates in addition to the minutes from the last FOMC meeting, but none are scheduled to be released today. Tomorrow brings us three of them, one of which is the week's least important. That is January's Housing Starts, which will be posted early tomorrow morning. It gives us an indication of housing sector strength and mortgage credit demand. It usually does not affect rates unless it varies greatly from forecasts. Current forecasts are calling for an increase in starts of new housing.

January's Industrial Production data will be released mid-morning tomorrow and is considered to be moderately important for mortgage rates. It gives us a measurement of manufacturing sector strength by tracking output at U.S. factories, mines and utilities. Analysts are expecting to see a 0.8% increase in production from December to January. A smaller than expected rise in output would be good news and should push bond prices higher, slightly lowering mortgage rates tomorrow morning.

The minutes from last FOMC meeting will be released during afternoon hours. Traders will be looking for any indication of the Fed's next move regarding monetary policy. They will be released at 2:00 PM ET, therefore, any reaction will come during afternoon trading. This particular set of minutes could be interesting due to the wording of the last post-meeting statement. I suspect there was some debate amongst the FOMC members before releasing that statement. These minutes will likely clarify if there is a consensus amongst them or if there is disagreement about the Fed's actions or inactions. A consensus likely means a sooner change to key short-term rates. Accordingly, I am expecting some volatility in the markets after the minutes are released.

Overall, the most important day of the week will likely be Friday with the very important Consumer Price Index being released, but Thursday may also be active days for mortgage rates due to the Producer Price Index being posted. We also cannot forget about tomorrow's FOMC minutes as they may be a non-factor but also have the potential to heavily influence the markets and mortgage pricing. In other words, be prepared for an active week in the markets and mortgage rates.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Lock if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Click here to see today’s rates.  Thirty year fixed still below 5%.

Rate Watch For February 2, 2010

Tuesday's bond market has opened flat with no relevant economic data on tap. The stock markets are showing gains with the Dow up 54 points and the Nasdaq up 7 points. The bond market is currently up 2/32, which will likely keep this morning's mortgage rates at yesterday's levels.

There is no relevant economic data scheduled for release today. Neither of the two speaking engagements were market movers. Treasury Secretary Geithner spoke before a Senate Finance Committee about the U.S. budget while Paul Volcker, who is the Chairman of the President's Economic Recovery Advisory Board, spoke to the Senate Bank Committee about high-risk banking activities. Neither has resulted on any market movements.

Tomorrow's only data is not likely to affect mortgage rates. The Institute for Supply Management will post their services index late tomorrow morning. This is the same organization that posted Monday's manufacturing index that is considered to be infl uential on the markets. Tomorrow's index surveys service providers rather than manufacturers. But unless we see a wide variance from the 50.9 reading that is expected, I don't see mortgage rates reacting to its results.

Thursday brings us the release of two reports to watch. Employee Productivity and Costs data for the 4th quarter will be released early Thursday morning. It can cause some movement in the bond market, but should have a minimal impact on mortgage pricing. If it varies greatly from analysts' forecasts of a 6.0% increase, we may see some movement in mortgage rates. However, the markets will be much more interested in Friday's data.

Late Thursday morning, December's Factory Orders data will be posted. It is similar to last week's Durable Goods Orders release in giving us a measurement of manufacturing sector strength, but this data includes new orders for both durable and non-durable goods. It is one of the less important reports of the week, but can influence mortgage pricing if it varies greatly from forecasts.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Rates updated daily at www.northstonemortgage.com

Daily Rate Watch for February 1, 2010

Monday's bond market has opened well in negative territory following stronger than expected economic reports. The stock markets are starting the week in positive ground with the Dow up 74 points and the Nasdaq up 13 points. The bond market is currently down 17/32, but due to strength late Friday we will see little change to this morning's mortgage rates compared to Friday's morning rates.

There were two relevant reports posted this morning. The first was January's Personal Income and Outlays data early this morning. It showed a 0.4% increase in income and a 0.2% rise in spending. The income reading was stronger than expected, but the spending increase fell short of forecasts. Therefore, this report can be considered neutral for mortgage rates.

The second report of the day was the Institute of Supply Management's (ISM) manufacturing index. This index tracks manufacturer sentiment by rating surveyed trade executives' opinions of business

conditions. It showed a reading of 58.4 that was well above what analysts were expecting to see. This means that more surveyed manufacturers felt business had improved last month than the previous month, indicating a strengthening manufacturing sector. This can be considered bad news for bonds and mortgage rates.

There is no relevant economic data scheduled for release tomorrow, but we do have two speaking engagements to watch. Treasury Secretary Geithner will speak before a Senate Finance Committee at 10:00 AM ET regarding the U.S. budget. At the same time, Paul Volcker who is the Chairman of the President's Economic Recovery Advisory Board, will testify to the Senate Bank Committee about high-risk banking activities. Since the government bonds are highly involved in the economic recovery and budget issues, these speeches may affect the markets if something unexpected is said. This could be positive or negative for bonds and mortgage rates, but are worth watching.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

View today’s rates at www.northstonemortgage.com

Daily Rate Watch for January 29, 2010

Friday's bond market has opened down again following stronger than expected results from some key economic data. The stock markets are showing early gains with the Dow up 62 points and the Nasdaq up 14 points. The bond market is currently down 6/32, but we will likely see little change in this morning's mortgage rates compared to yesterday's morning pricing due to strength in bonds late yesterday. This morning's potential increase in rates will be offset by the late gains of yesterday.

Today's most important report was the initial reading of the 4th Quarter Gross Domestic Product (GDP). It revealed a 5.7% annual rate of growth during the last quarter of 2009. This was much better than expected and the fastest pace in six years, indicating that the economy is likely growing at a faster pace than many had thought. That creates a negative for bonds because once the economy begins to gain momentum, inflations concerns will rise in the markets. Since inflation is the number one nemesis of the bond market, bonds tend to suffer when inflation is strengthening, leading to higher mortgage rates.

Preventing a sizable sell-off in bonds was a much lower than expected inflation reading within the data. That inflation reading came in half of forecasts, meaning that inflation isn't a concern yet. However, many experienced traders and analysts firmly believe that it will follow shortly if economic activity continues to grow at a pace similar to what today's GDP reading showed. Therefore, we have seen some selling in bonds, but considering the headline GDP reading, we should be content with this morning's trading.

The second piece of data that came out this morning was the 4th Quarter Employment Cost Index (ECI). It revealed a 0.5% increase in employer costs for wages and benefits. While this was higher than expected, it really has not had much of an impact on bond trading or mortgage rates because the GDP news is bigger news.

And to cap off today's relevant economic data was a higher than expected revision to the University of Michigan's Index of Consumer Sentiment for January. This index measures consumer confidence, which is thought to indicate consumer willingness to spend. The 74.4 reading indicates that consumers were more optimistic about their own financial situation this month than many had thought. Strengthening confidence usually translates into more consumer spending, fueling economic growth. However, this report doesn't carry enough power to heavily influence the markets, especially following the initial GDP reading for the quarter.

Next week brings us several important economic reports for the markets to digest. The first two come Monday morning with the release of December's Personal Income and Outlays data and January's ISM manufacturing index. The week ends with the almighty Employment report on Friday. There is not much to be concerned w ith in between, but the week will likely be an active one for the markets and mortgage rates. Look for more details on next week's events in Sunday's weekly preview.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Daily Rate Watch for January 28, 2010

 

Thursday's bond market has opened in negative territory as yesterday's afternoon weakness continues into this morning's trading. The stock markets are showing noticeable losses with the Dow down 74 points and the Nasdaq down 26 points. The bond market is currently down 5/32, which with yesterday's late losses will likely push this morning's mortgage rates approximately .375 - .500 of a discount point higher than yesterday's morning rates. Just how much of that increase will be seen this morning depends on whether or not your lender revised higher yesterday afternoon.

December's Durable Goods Orders was posted this morning, giving us an indication of manufacturing sector strength. It revealed a 0.3% increase in new orders for big-ticket products, which fell well short of analysts' forecasts of a 2.0% increase. However, if more volatile transportation related orders are excluded, such as orders for new aircraft, we saw a larger than expected increase of 0.9 %. Therefore, this report basically gives us mixed results, but should be considered slightly negative for bonds and mortgage rates.

In a bit of positive news, the Labor Department reported that 470,000 new claims for unemployment benefits were filed last week. This was a decline from the previous week, but was much higher than the 450,000 that were expected. This is good news for bonds but its impact on trading and mortgage pricing is minimal because it is not considered to be very important news due to its single-week tracking.

There are three relevant reports scheduled for release tomorrow morning. The first is arguably the single most important report that we see regularly. The initial reading of the 4th Quarter Gross Domestic Product (GDP) will be posted early tomorrow. This data is so important because it is considered to be the best measurement of economic growth. The GDP itself is the total sum of all goods and services produced in the United States. Its' results usually have a major impact on the financial markets and can cause significant changes in mortgage rates. There are three readings to each quarter's activity, each released approximately one month apart. The first, which usually carries the most volatility, is expected to be an increase of 4.6%. A noticeably weaker reading would be great news for the bond market, questioning the pace of the economic recovery. That would likely fuel stock selling and a rally in bonds that would push mortgage rates lower tomorrow morning.

The 4th Quarter Employment Cost Index (ECI) is also scheduled for release early tomorrow morning. It measures employer costs for employee wages and benefits, giving us an indication of the threat of wage inflation. Current forecasts are showing an increase of 0.4%. A lower than expected reading would be favorable to bonds and mortgage rates, but the GDP reading will be the biggest influence on trading and rates tomorrow.

The last report of the week is the revised reading to the University of Michigan's Index of Consumer Sentiment. This index measures consumer confidence, which is thought to indicate consumer willingness to spend. I don't see this data having much of an impact on the markets or mortgage rates due to the importance of the employment index and GDP figures. It is expected to show a slight upward revision from the previous estimate of 72.8.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Lock if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Rate Lock Update for December 1, 2009

Tuesday's bond market has opened in negative territory despite weaker than expected economic results from a very important report. Stock market gains are likely the cause of this morning's bond weakness. Stocks are rallying with the Dow up 133 points and the Nasdaq up 30 points. The bond market is currently down 11/32, which should push this morning's mortgage rates higher by approximately .125 - .250 of a discount point.

Today's big news came from the Institute for Supply Management (ISM) who posted their manufacturing index for November. They announced a reading of 53.6 that fell short of the 54.9 that was expected, meaning manufacturer sentiment was weaker than thought. This is supposed to be good news for bonds and mortgage rates because a weakening manufacturing sector makes a broader economic recovery less likely and eases inflation concerns that hurt bond prices. Unfortunately for mortgage shoppers, today's data is not influencing trading as much as it usually does.

The Fed Beige Book will be released at 2:00 PM ET tomorrow and is the day's only relevant data. This report, which is simply named after the color of its cover, details economic conditions by region. It is relied on heavily during the FOMC meetings when determining monetary policy, so its results can influence bond trading and mortgage rates if it shows any significant surprises.

The next piece of data that we need to be concerned with comes Thursday morning with the release of the revised 3rd Quarter Productivity report. This index is expected to show a downward revision from the preliminary reading of worker productivity. Higher levels of productivity are thought to allow the economy to expand without inflationary pressures rising. This is good news for the bond market because economic growth itself isn't necessarily bad for the bond market. It is the conditions around an expanding economy, such as inflation, that hurt bond prices and mortgage rates. Current forecasts are calling for an annual rate of 8.6%, down from the previous estimate of 9.5%.

I still believe Friday is the day to watch out for. It brings us the almighty monthly Employment report. Its results can erase the entire week's gains or losses in the hour of trading following its release. It appears that my concern about bonds meeting resistance at current levels was accurate. This will probably remain the case until we get a significant catalyst to break through these levels. Friday's report certainly has the potential to do this, assuming that the data is favorable to bonds. Until then, it is prudent to remain cautious towards rates.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.

Freddie Mac you broke my heart

Freddie Mac you broke my heart.  You teased me with your beautiful little condo nestled on the wooded hillside by the lake.  Two ample bedrooms and two sparkling baths complete with tile floors and sleek tile tub surrounds.  Your spacious south facing living room took full advantage of the fleeting Seattle sun.  But you, unresponsive, communication challenged and unable to commit.  My intentions were clear from the very start, I wanted your condo to be my own to have and to hold in sickness and health to sale do we part, but it seems it was just not to be.  Perhaps you have been wounded by other less serious suitors but 30 days is way too long to expect me to wait.  Terms agreed to orally but no written response.  As beautiful and seductive as your condo is I have left you for another. 

Three days from offer to inspection and now ready to close.  My new condo is beautiful and fully committed, closer to the city center and in way better shape. You my old flame, I wish all the best.  Perhaps we can still be friends but more likely I think not.  Freddie Mac, until you clean up your act and deal with your skeletons you are destined to keep your own condo company.

 

Thoughts from a buyer after waiting 30 days for a signed agreement from Freddie Mac that never materialized.

Wordless Wednesday

Tax Credit Extension

Right now a battle is being waged in the House of Representatives over extension of the $8000 tax credit for first-time buyers.  On Monday the House voted unanimously to extend the deadline for one group of home buyers.  The extension was granted for military personnel, Foreign Service and intelligence officers.  HR 3590 was passed granting the extension to those that meet the underlying criteria and who are serving overseas or have spent at least 90 days deployed outside of the US during the current calendar year.  The bill was introduced by Rep. Charles Rangel (D-NY) because families serving overseas were being passed over for the one time opportunity to purchase a home.  Under the original law, a homeowner was required to occupy the home for 36 months or the credit would be recaptured.  Because the military and other Foreign Service employees frequently relocate many have been reluctant to apply for the credit even if they did purchase a home.

As far as the extension for the rest of us, there is no news as of yet as to whether any extension will be approved.  Both the National Association of Realtors and the National Association of Home Builders are strongly in favor of the extension.