October 12, 2009 Mortgage Market Week In Review- Dana Bain

http://www.bainmortgage.com/MortgageMarketWeekInReview Newsletter-October 12th, 2009 Provided by Dana Bain Dana Bain Premiere Mortgage Services 11 Malvern Hill Road Sterling, MA 01564 Phone: (978) 422-2311 Fax: (978) 422-2313 E-Mail: dana@bainmortgage.com Market Comment Mortgage bond prices fell last week pushing mortgage interest rates higher. The Treasury auctions were mixed with the 3 and 10-year auctions showing decent foreign demand. Unfortunately the 30-year auction was a huge disappointment and caused mortgage interest rates to worsen Thursday. The fear of future rate hikes sent mortgage bonds lower Friday pushing mortgage interest rates higher. For the week, interest rates rose by about 1/2 of a discount point. The consumer price index will be the most important release this week. Any signs of inflation will generally not bode well for mortgage bonds. Retail sales and the Fed minutes are also likely to factor into trading this week. Any surprises may lead to mortgage interest rate volatility. LOOKING AHEAD Economic Indicator Release Date & Time Consensus Estimate Analysis Retail Sales Wednesday, Oct. 14, 8:30 am, et Down 2.0% Important. A measure of consumer demand. Weakness may lead to lower mortgage rates. Business Inventories Wednesday, Oct. 14, 10:00 am, et Down 0.8% Low importance. An indication of stored-up capacity. A significantly larger increase may lead to lower rates. Fed Minutes Wednesday, Oct. 14, 2:00 pm, et None Important. Details of the last Fed meeting will be thoroughly analyzed. Consumer Price Index Thursday, Oct. 15, 8:30 am, et Up 0.2%, Core up 0.1% Important. A measure of inflation at the consumer level. Lower figures may lead to lower rates. Philadelphia Fed Survey Thursday, Oct. 15, 10:00 am, et None Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. Industrial Production Friday, Oct. 16, 9:15 am, et Up 0.1% Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. Capacity Utilization Friday, Oct. 16, 9:15 am, et 69.7% Important. A figure above 85% is viewed as inflationary. Weakness may lead to lower rates. U of Michigan Consumer Sentiment Friday, Oct. 16, 10:00 am, et 73.5 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. Tax Credit A slew of professionals tied to the housing sector made eager pleas to Congress last week requesting the $8000 first time homebuyer tax credit be extended. The benefit was part of the stimulus plan and is set to expire the end of November. The White House indicated the program "helped the economy" and led to "quite a bit of success" and noted consideration of extending the program. There are additional proposals in the Senate to not only extend the program but also to increase the tax credit and remove the first time homebuyer qualification. Unfortunately the cost to extend the credit is around $1 billion per month. This has politicians from both sides of the isle concerned. The House voted Thursday to extend the credit for American service members another 12 months. Both parties have members pushing for the extension to apply to all purchasers. Analysts indicate some sort of extension is very likely. Last week was a great example of the danger of thinking rates would always improve. The good news is that despite last week’s bounce higher, rates still remain historically favorable. MORTGAGE MARKET IN REVIEW Newsletter-October 12th, 2009