Mortgage Newsletter- June 18th, 2012 Dana Bain Premiere Mortgage 978-422-2311

By
Mortgage and Lending with Premiere Mortgage Services Inc. MLO 18693

http://www.bainmortgage.com/MortgageMarketWeekInReview

Newsletter-June 18th, 2012
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
 
 
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Market Comment

Mortgage bond prices finished the week higher, which pushed mortgage interest rates lower. Rates were initially worse to start the week Monday following the euro zone’s $125 billion assistance package announced for Spain’s banks. This reversed some of the flight to quality buying of U.S. debt instruments. Rates bounced back gradually through the week as most of the data showed continued economic weakness. Weekly jobless claims were higher than expected while industrial production, capacity use, and consumer sentiment data all came in weaker than expected. Core producer and consumer prices rose 0.2% as expected. Rates finished the week better by about 1/8 of a discount point.

LOOKING AHEAD

Economic
Indicator

Release
Date & Time

Consensus
Estimate


Analysis

Housing Starts

Tuesday, June 19,
8:30 am, et

618k

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

Wednesday, June 20,
2:15 pm, et

No rate changes

Important.Few expect the Fed to change rates, but some volatility may surround the adjournment of this meeting.
Weekly Jobless Claims

Thursday, June 21,
8:30 am, et

387k

Important.An indication of employment.Higher claims may result in lower rates.
Existing Home Sales

Thursday, June 21,
10:00 am, et

4.63m

Low importance.An indication of mortgage credit demand.Significant weakness may lead to lower rates.
Leading Economic Indicators

Thursday, June 21,
10:00 am, et

Down 0.1%

Important.An indication of future economic activity.Weakness may lead to lower rates.
Philadelphia Fed Survey

Thursday, June 21,
10:00 am, et

-3.8

Moderately important.A survey of business conditions in the Northeast.Weakness may lead to lower rates.
30Y TIPS Auction

Thursday, June 21,
1:15 pm, et

None Important.Bonds will be auctioned.Strong demand may lead to lower mortgage rates.

Housing Starts

Housing starts data is a leading indicator of the state of our economy. This report, provided by the Bureau of the Census, takes into account data from both single-family homes and multi-family dwellings. Building permits are also released with the housing starts data. By knowing the number of permits issued monthly, analysts can attempt to estimate for the upcoming months. Normally, starts are 10% higher than permits since all locations are not required to have a building permit.

Housing starts and permits give a warning of future economic activity. In effect, a rise in housing starts can lead to a fall in the bond market and vice versa. Consumers tend to hold off on the purchase of new homes, new cars, and other big-ticket items if they are worried about the future of the economy. Housing is an important part of our economy. Continued declines in housing starts can lead to continued economic slowdown and essentially a deeper recession. On the other hand, increases in housing starts could signal a possible reversal.

From the opposite perspective, changes in interest rates often lead to changes in housing starts. High interest rates can cause a significant decline in home sales, which can lead to a drop in housing starts. Just the opposite happens when rates drop and is one of the additional reasons the Fed is trying to keep rates low. Low mortgage rates affect both home sales and housing starts.

The housing market is a vital component in sustaining the economy. The continued weakness of the housing market has many worried. Many economists believe housing will continue to suffer. There is still uncertainty regarding the future state of the economy. Interest rates are historically low. A cautious approach is wise to protect against future volatility.



 

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MORTGAGE MARKET IN REVIEW Newsletter-June 18th, 2012
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