Apr 8, 2013 | Mortgage Rates
Last week’s economic news includes several factors that drove U.S. mortgage rates lower.
The Bank of Japan announced that it would increase its purchase of bonds by $1.4 trillion over the next two years.
This news caused yields on Japanese bonds to fall, which made U.S. bonds more appealing to international investors, that in turn increased MBS prices and caused mortgage rates to fall.
Bumpy Employment Numbers Support Lower Interest Rates
Other significant economic news involves an unexpected drop in the number of new jobs created last month.
The Bureau of Labor Statistics (BLS) Nonfarm Payrolls Report issued Friday indicated that 88,000 jobs were added in March, which fell considerably short of the expected 190,000 jobs added as well as the 236,000 jobs added in February.
Average hourly earnings remained flat against February, which indicates another stall in U.S. economic growth.
Expanding employment sectors for March included professional and business services and healthcare, while retail jobs decreased.
Jobless claims increased last week in concurrence with lower than expected jobs added for March.
New jobless claims came in at 385,000 and were higher than expectations of 345,000 new jobless claims and the prior week’s jobless claims of 357,000.
The monthly unemployment rate fell from 7.7 percent to 7.6 percent, but this isn’t encouraging news.
According to the BLS, the unemployment rate fell due to workers leaving the work force instead of workers finding jobs.
Next week, Treasury Auctions will be held Tuesday, Wednesday and Thursday.
On Wednesday, the Federal Reserve will release FOMC minutes.
Fed Continues Monthly Bond Purchases
Investors and analysts review the minutes for predicting future economic developments and also for gauging the Fed’s sentiment about how or if changes should be made to the current quantitative easing program (QE).
The current QE program involves the Fed’s monthly purchase of $85 billion in bonds and MBS is intended to keep long-term interest rates including mortgage rates low.
Retail Sales will be released Friday, and as indicated by falling job numbers in the retail sectors, analysts are expecting no growth for March in either report.
Global news concerning North Korea and the European Union economic situation could also move U.S. markets up or down depending on the nature of the news.
While not encouraging in terms of an economic recovery, these events show that the recovery is proceeding with ups and downs; this doesn’t provide investors a clear picture and may cause them to seek safe haven in bonds.
The good news for Worcester County area homeowners is uncertainty and low expectations of the financial markets typically help keep mortgage rates lower.
Apr 1, 2013 | Mortgage Rates
European Market Jitters Continue To Affect The US Economy
Mortgage rates fell last week as investor concerns over the European economy grew.
Fears of growing differences between wealthier European nations and European nations needing economic aid brought higher bond prices and lower mortgage rates.
Positive news for Cyprus came when an agreement for an EU bailout was reached, but strict terms indicate that Germany and other nations are growing less enthusiastic about bailing out the banks of EU nations with shaky economies.
Meanwhile, the Italian government has not been able to agree on a coalition government, which reduces the chances for economic reform in the EU’s third largest country.
European trade with the U.S. could fall as the result of the EU’s ongoing economic challenges; this in turn would likely reduce U.S. inflation, which is good for lower mortgage rates.
Low inflation could also prolong the Fed’s commitment to its quantitative easing program that is designed to keep long term interest rates, including mortgage rates, lower.
Last Week‘s Economic News Quiet, No Major Surprises
On Tuesday, New Home Sales for February were released, and came in short of investor expectations of 420,000 home sales on an annual basis.
February’s figure came in at 411,000 new homes sold as compared to January’s revised reading of 431,000 new homes sold.
Winter weather conditions are one reason for the decline in new home sales, which was the largest decline since February of 2011.
The National Association of REALTORS® released its Pending Home Sales Index for February on Wednesday; pending home sales reflected the results for New Home Sales with a reading of -0.4 percent as compared to expectations of a 2.0 percent reading.
January’s reading for Pending Home Sales was also higher at 4.5 percent.
Home prices and mortgage rates move according to supply and demand; if demand for homes falls, home prices are likely to do likewise as are mortgage rates.
But as demand for homes increases and prices rise, mortgage rates typically rise as well. Would-be buyers who have been waiting for their best deal may want to get into the housing market now, as strong signs of economic improvement are in play, but home prices and mortgage rates haven’t yet gone through the roof.
In other economic news, Thursday’s Jobless Claims Report fell short of Wall Street projections and came in at 357,000 new jobless claims against expectations of 340,000 new jobless claims.
The previous week’s jobless claims came in at 336,000 new jobless claims.
Analysts typically view a four-week rolling average of jobless claims as a more accurate indicator for the economy as jobless claims can vary widely week-to-week.
Consumer Sentiment for March was released Friday and came in at 78.6 and exceeded expectations of 72.5 for March.
The current reading also surpassed the prior reading of 71.8 percent. As consumers gain confidence in the economy, they are more likely to buy homes.
This week, the European Central Bank (ECB) meeting scheduled for Thursday and monthly Employment Data set for release Friday are among anticipated economic news events.
Feb 4, 2013 | Mortgage Rates
Mortgage rates worsened last week amid evidence of an improving economy. Conforming mortgage rates climbed in Massachusetts and nationwide, rising to a 4-month high.
Freddie Mac has the average 30-year fixed rate mortgage rate at 3.53% for borrowers willing to pay 0.7 discount points plus a full set of closing costs.
There was plenty of news on which for rates to move last week.
First, the Federal Open Market Committee (FOMC) met and voted to hold the Fed Funds Rate in its current target range near 0.00 percent. The Fed also recommitted to purchasing mortgage-backed securities (MBS) and Treasury securities on the open market until such time as the national Unemployment Rate reaches 6.5%, or until inflation rates rise.
Then, Friday, it was shown in the Non-Farm Payrolls report that the national jobless rate had climbed to 7.9 percent, a statistic Wall Street pinned to Hurricane Sandy. In addition, it was shown that 157,000 net new jobs were added to the U.S. economy in January.
This was a slight improvement from the month prior’s revised figures, and marked the 27th consecutive month of U.S. job growth.
Also last week, the National Association of REALTORS® reported the December Pending Home Sales Index to be lower than expected; largely the result of shortages of available homes in many areas.
In addition, Durable Orders for December were more than twice what investors expected; a further indication of a strengthening U.S. economy.
Lastly, the ISM Index for January surpassed Wall Street’s expectations. This manufacturing index is considered an indicator of future inflationary trends. An upward trend in this index suggests rising mortgage rates. While current mortgage rates remain relatively low, they can be expected to continue rising as the economy improves.
This upcoming week will be quieter with fewer economic series scheduled for release. Factory Orders for December will be announced, as will the ISM Services Index and Jobless Claims. Mortgage rates may continue to rise.
Jan 28, 2013 | Mortgage Rates
Mortgage rates rose last week as investors gained confidence in the global economy. China and Europe posted better-than-expected manufacturing rates, U.S. Jobless Claims fell for the second straight week, and the worst of the European debt crisis appears to have passed.
Last week’s economic news provided further evidence of a strengthening U.S. economy.
The National Association of REALTORS® released its Existing Home Sales report, which indicates that existing home sales improved by 13 percent on a year-over-year basis and are now at their highest point since 2007. The group expects sales of existing homes to increase by 9 percent in 2013.
The Commerce Department released its monthly New Home Sales report; while new home sales for December fell short of Wall Street’s expectations, sales of new homes are almost 20 percent higher than they were one year ago.
Growing demand for homes coupled with lower inventories of available homes suggests that the days of rock-bottom home prices and low mortgage rates are dwindling.
According to Freddie Mac, the average mortgage rate for a 30-year fixed rate loan was 3.42 percent with borrowers paying 0.7 percent in discount points plus closing costs. The average rate for a 15- year fixed rate mortgage was 2.71 percent with borrowers paying 0.7 percent in discount points plus closing costs.
While slight, the week-over-week increase in mortgage rates in Worcester County area could become a trend.
Weekly Jobless Claims fell below Wall Street forecasts for the second week in a row. 330,000 new jobless claims were filed; far fewer new claims were filed than the 360,000 new jobless claims expected by investors. New jobless claims also fell below the prior week’s 335,000 new jobless claims. Fewer jobless claims are a sign of a stabilizing economy.
Mortgage rates typically rise as investors gain confidence in the economy and financial markets.
This week’s economic news calendar is jam-packed.
Investors await the outcome of the Federal Open Market Committee’s first scheduled meeting of 2013, treasury auctions are scheduled for Tuesday, Wednesday and Thursday, and the Pending Home Sales Index will be released.
Plus, the Department of Labor’s Non-farm Payrolls Report and Unemployment Report will be released Friday morning.
Jan 14, 2013 | Mortgage Rates
Mortgage rates rose last week nationwide during a week of sparse economic news.
Thursday’s weekly jobless claims report showed 371,000 new claims, which was 1,000 fewer jobless claims than for the prior week. Wall Street expectations of 365,000 new jobless claims turned out to be too optimistic.
The semi-quarterly statement released Thursday by the European Central Bank (ECB) announced that the region’s inflation remains below its 2 percent ceiling as established by central banker. Economic weakness in the Eurozone is expected to persist into 2013 with signs of recovery becoming evident toward the end of this year.
ECB cited financial and structural reforms as essential to economic recovery, and noted that national governments within the Eurozone have been slow to implement such reforms. Without such reforms, Euro-area economies may continue to struggle, which would likely lead investors to seek a safe haven in the bond market, moving bond prices higher.
As bond prices rise, mortgage rates in Massachusetts and nationwide typically fall.
Also last week, Freddie Mac’s Primary Mortgage Market Survey reported the average rate for a 30-year fixed rate mortgage rising from 3.34 percent to 3.40 percent for buyers paying 0.7 percent in discount points plus closing costs. The average rate for a 15-year fixed rate mortgage rose from 2.64 percent to 2.66 percent.
Required discount points for the 15-year fixed rate mortgage rose from 0.6 to 0.7 percent.
Import prices for December released Friday were reported at -0.1 percent, below the consensus estimate of +0.1 percent. This report measures the prices of goods purchased in the U.S, but produced abroad and is considered an important indicator of inflationary trends affecting internationally produced goods.
Inflation tends to harm mortgage rates.
Next week’s economic calendar is full of economic data and includes the release of the Producers Price Index (PPI), Retail Sales figures, the Consumer Price Index (CPI). The Fed is also set to issue its Beige Book report, and the NAHB Housing Market Index and Consumer Sentiment report will be released.
Mortgage rates remain low, but are rising.
Jan 7, 2013 | Mortgage Rates
Mortgage rates in Massachusetts rose during the first week of 2013.
The fiscal cliff crisis was resolved prior to the market’s opening Wednesday, when legislators voted to approve a deal. While many tax cuts were extended for taxpayers earning less than $450,000 annually, other facets of the fiscal cliff issue are yet to be addressed, including budget cuts for federal government agencies.
Investors were surprised to learn that the Fed may end its third round of quantitative easing (QE3) sometimes in 2013. The FOMC meeting minutes for December 2012 suggested that Fed support for its QE3 program has waned as the economy has improved.
First-time jobless claims increased for the week ending December 29, 2012 to 372,000 from the prior week’s 350,000, worse than Wall Street’s consensus opinion of 360,000 new jobless claims.
The December 2012 Non-Farm Payrolls surpassed analyst expectations, posting 155,000 net new jobs for the month. The report also showed the national Unemployment Rate rising one-tenth of one percentage point to 7.8%. When the jobless rate falls to 6.5%, the Federal Reserve is expected to begin raising the Fed Funds Rate from its current target range near zero percent.
Overall, mortgage rates rose by as much as 0.25 percentage points last week. However, because the increase occurred wholly between Wednesday and Friday, Freddie Mac’s weekly mortgage rate survey failed to include it.
Freddie Mac reported the previous week’s average rate for a 30-year fixed rate mortgage was 3.34 percent for borrowers paying 0.7 percent discount points plus closing costs. The average rate for a 15-year fixed rate mortgage was 2.64 percent for borrowers paying 0.7 discount points plus closing costs.
As this week opens, mortgage rates are considerably higher.
This week’s scheduled economic news includes Treasury auctions on Tuesday, Wednesday and Thursday; weekly Jobless Claims report on Thursday; and not much else. There will be planned speeches, however, from five members of the Federal Reserve, including Richmond Federal Reserve President Jeffrey Lacker.
Fed President Lacker was the lone dissenting vote among voting FOMC members in each of last year’s policy votes.
