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Mortgage Market in Review - 11/16/2009

By
Mortgage and Lending with Mortgages By Mick

MARKET COMMENT

Mortgage bond prices rose last week pushing mortgage interest rates lower. The Fed spent another $45 billion buying mortgage bonds between November 5th and the 11th. For all the criticism the Fed receives for the handling of the economy, they do deserve credit for keeping mortgage interest rates low throughout this year. How it all plays out in the long term is uncertain. The record Treasury auctions continued to be absorbed in trading without any major problems. For the week, interest rates improved by about 7/8ths of a discount point.

The consumer price index data Wednesday will be the most important release this week. Producer price index data along with retail sales data will set the tone for the start of the week. Inflation indications would likely hurt mortgage interest rates but signs of tame inflation could help rates improve.

LOOKING AHEAD

Economic
Indicator

Release
Date and Time

Consensus
Estimate

Analysis

Retail Sales

Monday,
Nov. 16,
8:30 am, et

Up 0.9%

Important. A measure of consumer demand. A smaller than expected increase may lead to lower rates.

Business Inventories

Monday,
Nov. 16,
10:00 am, et

Down 0.6%

Low importance. An indication of stored-up capacity. A significantly large increase may lead to lower rates.

Producer Price Index

Tuesday,
Nov. 17,
8:30 am, et

Up 0.5%,
Core up 0.1%

Important. An indication of inflationary pressures at the producer level. Weaker figures may lead to lower rates.

Industrial Production

Tuesday,
Nov. 17,
9:15 am, et

Up 0.3%

Important. A measure of manufacturing sector strength. A lower than expected increase may lead to lower rates.

Capacity Utilization

Tuesday,
Nov. 17,
9:15 am, et

70.8%

Important. A figure above 85% is viewed as inflationary. Weakness may lead to lower rates.

Housing Starts

Wednesday,
Nov. 18,
8:30 am, et

Up 1.5%

Important. A measure of housing sector strength. Weakness may lead to lower rates.

Consumer Price Index

Wednesday,
Nov. 18,
8:30 am, et

Up 0.2%,
Core up 0.1%

Important. A measure of inflation at the consumer level. Weaker figures may lead to lower rates.

Leading Economic Indicators

Thursday,
Nov. 19,
10:00 am, et

Up 0.4%

Important. An indication of future economic activity. A smaller increase may lead to lower rates.

Philadelphia Fed Survey

Thursday,
Nov. 19,
10:00 am, et

None

Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates.

TAX CREDIT EXTENSION

The housing market received some good news when Congress recently acted on the pleas of housing sector professionals and extended the $8000 first time homebuyer tax credit. In addition, the program was expanded to include move-up buyers with a $6500 tax credit. The program now runs through April of next year. Prior to the extension the program was set to eclipse at the end of November.

Even with the positive measure there is still some criticism the program does nothing to address the foreclosure problems that continue to plague the housing market. Unfortunately the cost to extend the credit is around $1 billion per month. This has politicians from both sides of the isle concerned.

The new and move-up buyer incentives coupled with historically low interest rates make now a great time to purchase a home. Low rates also make it favorable for many current homeowners to refinance.

Posted by

Mick Rothblott

Mortgage & Construction Loan Planner

 

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mick@mickdoesloans.com

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