The Week Ahead in Mortgage Finance

The most significant economic data next week will be the monthly inflation reports. The Producer Price Index (PPI) focuses on the increase in prices of "intermediate" goods used by companies to produce finished products and will come out on Wednesday. The Consumer Price Index (CPI), the most closely watched monthly inflation report, will come out on Thursday. CPI looks at the price change for those finished goods which are sold to consumers. In addition, Retail Sales will be released on Monday. Retail Sales account for about 70% of economic activity. Industrial Production will come out on Wednesday. Housing Starts will be released on Thursday. Empire State, Philly Fed, Consumer Sentiment, Leading Indicators and Import Prices will round out the schedule.

Growing Labor Market Confidence Affecting Mortgage Rates

A review of the week in home loan finance from MGM Mortgage, Cedar City, Iron County, Utah

While last week was packed with central bank meetings and major economic data, there was very little significant economic news this week. The small amount of data that was released this week reinforced the view that the labor market is improving. This is great for the economy, but bad for mortgage rates, and rates ended the week higher.

This week's reading for Weekly Jobless Claims showed a decline to 323K, the lowest level since January 2008. This marked the third straight week that Jobless Claims were below the 350K level. Weekly Jobless Claims measure the number of new claims for unemployment benefits. There will always be some number of job changes each week, so there will always be new claims. In the years prior to 2008, Jobless Claims mostly held steady between 300K and 350K. The financial crisis then caused Jobless Claims to spike to levels above 600K during the first half of 2009. The labor market has been slowly improving since then, and it appears that Jobless Claims have finally returned to the levels seen before the financial crisis.

Jobless Claims are only one half of the employment story. The other big factor in the strength of the labor market is the number of people being hired. During a recession, companies often reduce the size of their workforce. As the economy recovers, companies first slow the pace of layoffs and then begin to retain their existing employees as business picks up. Eventually, companies reach the point where they need to add employees to meet growing demand. The stronger than expected Employment report last week and the recent Jobless Claims data provide positive indications that the economy may be at this point. Increased job gains will be great news for the economy and for the housing market.

The Week Ahead in Mortgage Finance

The biggest economic report next week will be Friday's release of first quarter GDP, the broadest measure of economic growth. Before that, Existing Home Sales will come out on Monday and New Home Sales on Tuesday. Durable Orders, another important indicator of economic growth, will be released on Wednesday. Consumer Sentiment will round out the schedule. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.

Better Unemployment Figures Barely Dent Mortgage Rates - For Now...

A review of the week in home loan finance from MGM Mortgage, Cedar City, Iron County, Utah

During a week packed full of major economic news, the big market mover was Friday's stronger than expected Employment report, and mortgage rates ended the week higher. This week's Fed and ECB meeting announcements produced some volatility but had little net impact.

Following a dismal March Employment report and weaker than expected first quarter GDP data, investors were concerned about another spring slowdown for the US economy. The April Employment report helped alleviate those fears, however. Against a consensus forecast of 155K, the economy added 165K jobs in April. The bigger news was that the figures for February and March were revised higher by 114K. With the revisions, the economy added an average of more than 200K jobs per month during the first quarter. The Unemployment Rate unexpectedly declined from 7.6% to 7.5%, the lowest level since December 2008. Without a doubt, the data was significantly stronger than expected, which is good news for the economy. But for mortgage rates, it was bad news for a couple of reasons. It increases future inflation expectations and it moves the Unemployment Rate closer to the 6.5% target which may cause the Fed to scale back its bond purchase program.

The Fed concluded its highly anticipated meeting on Wednesday. Prior to the release of its statement, investors, expecting to see clearer signs of support for an increase in the magnitude or the duration of the bond buying program, pushed up the price of Treasuries and mortgage-backed securities (MBS). The Fed statement was little changed from the last statement, however, causing MBS prices to lose their earlier gains. The Fed will continue asset purchases until the labor market improves "substantially". The primary change to the statement was the addition of the language that the Fed is "prepared to increase or reduce" the pace of its asset purchases based on changes in its outlook for the labor market and inflation.

The Week Ahead in Mortgage Finance

The biggest economic report next week will be Friday's release of first quarter GDP, the broadest measure of economic growth. Before that, Existing Home Sales will come out on Monday and New Home Sales on Tuesday. Durable Orders, another important indicator of economic growth, will be released on Wednesday. Consumer Sentiment will round out the schedule. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.