The Week In Review (February 12, 2007) : What To Watch For

February 12, 2007

Despite the dearth of economic news last week, mortgage rates staged somewhat of a rally.  By the time the week ended. mortgage rates had retreated by half of the prior week’s major run-up.  The week was not without fireworks, however.  In prepared remarks, Dallas Fed President Fisher dropped a hint about future Fed rate hikes […]

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Three Fed Speakers Expected To Stay On Course Today

February 9, 2007

As the week closes today, three Federal Reserve Presidents are set to deliver speeches. The most well-known of the speakers is Dallas Fed President Richard Fisher.  Fisher is known for speaking candidly and has produced a plethora of sound bites over the years. Also scheduled to speak are Cleveland Fed President Sandra Pianalto and St. […]

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England and Europe Impact Domestic Mortgage Rates

February 8, 2007

The Bank of England and the European Central Bank left their benchmark lending rates unchanged today.  Both alluded, however, to the need for future rate increases and these policies can have a direct impact on domestic mortgage rates. When strong governments issue debt (i.e. bonds), it is “guaranteed money” and, therefore, risk-free.  When nations with […]

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Plosser Tells Philadelphia: Rates May Need To Increase

February 7, 2007

Last week, the Federal Open Market Committee held the Fed Funds Rate at its current level and indicated that the economy is expanding at an acceptable pace.  This morning, however, a Federal Reserve Bank President delivered a public speech to the contrary. In prepared remarks to the local Chamber of Commerce, Philadelphia Federal Reserve Bank […]

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The Two Methods To Generate Home Equity Are Not Equal

February 6, 2007

Home equity is created in one of two ways (assuming increasing home value and a non-negatively amortizing first mortgage). In the first method of creating equity, the homeowner pays down the principal balance on the mortgage.  This increases the difference between what is owed on the home and what the home is worth. In the […]

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The Week In Review (February 5, 2007) : What To Watch For

February 5, 2007

Last week was not for the weak-hearted as mortgage rates bounced around like a fumbled Super Bowl football.  In a widely-expected move, the Federal Reserve held the Fed Funds Rate at 5.25% for the fifth consecutive meeting, stating that growth is “moderate” and that inflation pressures may be subsiding. Consumer spending represents two-thirds of the […]

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Upward Revisions Keeps Weak Job Data From Moving Rates

February 2, 2007

This morning’s Non-Farm Payrolls report showed that 111,000 new jobs were created in January, short of Wall Street’s 155,000 expectations.  The weaker-than-expected figure did not give mortgage markets a reason to rally, however, because December’s figures were revised higher by 39,000 and November’s by 42,000. Traders have shrugged off the data for three major reasons: […]

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The Fed Says: Housing Shows Signs of Stabilization

February 1, 2007

The FOMC left the Fed Funds Rate at 5.250% yesterday, signaling controlled growth in the months ahead.  Most notable was the press release’s inclusion of “tentative signs of stabilization” with respect to the housing market and the removal of references to high energy prices. Because the FFR did not change, the FFR-derived Prime Rate also […]

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It’s Not What They Do, It’s What They Say

January 31, 2007

It’s all eyes on the Fed today as the market sits patiently, waiting for the 2:15 P.M. EST press release.  Despite strong 2006 Q4 growth figures and a five percent spike in oil prices yesterday, there is an eerie calm while markets wait for the FOMC’s press release. In its December 2006 press release, the […]

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The Market Stops To Catch Its Breath

January 30, 2007

60 days ago, markets put a 36% probability that the Fed would lower the Fed Funds Rate by March 2007.  Today, that probability is zero.  If you’re wondering why mortgage rates have ascended so quickly, that’s part of your answer — inflation expectations are changing. Rates increased again on Monday and today the market catches […]

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The Week In Review (January 29, 2007) : What To Watch For

January 29, 2007

After a week of bludgeoning in which mortgage rates rose as much as 0.50% on the heels of a supposed housing sector rebound, don’t expect the fireworks to stop anytime soon. This Monday and Tuesday will be quiet with respect to economic releases, but Wednesday through Friday will be jammed-packed with mortgage-rate-moving data. The highlights […]

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Has “Housing Stability” Become a “Housing Rebound”?

January 26, 2007

Mortgage bonds continue their slide after yesterday’s outright hysteria. Today’s New Homes Sales showed a 4.8% jump in December to an annualized pace of 1.12 million homes.  This is about 14% higher than July’s pace and some economists are wondering if “housing stability” just turned into “housing rebound”. Home supply plummeted from 7.2 months to […]

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Existing Home Sales Data is Weak, But Traders Find Strength

January 25, 2007

Existing Home Sales showed weaker-than-expected numbers this morning, but that hasn’t stopped the slide in mortgage-backed securities.  This is a counter-intuitive movement so let’s take a deeper look. First, the supply of homes dropped from 7.3 months to 6.8 months.  With less supply, there is a tendency for home values to stabilize and that is […]

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The Market Sees What It Wants To See

January 24, 2007

With the Federal Open Market Committee scheduled to meet for two days beginning January 30, the Fed has entered “blackout mode” and no Fed speakers are slated for the next week.  Combine Fed Silence with lack of economic data, and market are moving on emotion and gut feel. That’s bad news for rate shoppers because […]

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Mortgage Insurance Is Tax Deductible in 2007, But With A Catch

January 23, 2007

Adding complexity to the home financing process, The Tax Relief and Health Care Act of 2006 includes new tax code for homeowners.  The act grants itemized deductions for private mortgage insurance (PMI) and government mortgage insurance (MIP) expense premiums paid in 2007. For all loans originated in the 2007 calendar year, mortgage insurance is tax-deductible […]

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The Week In Review (January 22, 2007) : What To Watch For

January 22, 2007

Last week, economic data showed that the economy continues to grow at a healthy pace and that last year’s fears of an economic recession may have been overblown; wholesale and consumer prices were up 1.1% and 2.5% annually, respectively. With no clear recessionary indicators present in the market, long-term mortgages such as the 30-year fixed […]

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The Irrelevance of The University of Michigan Consumer Sentiment Survey

January 19, 2007

Today’s University of Michigan Consumer Sentiment survey showed that Americans are feeling terrific about the state of the economy.  The index jumped to 98.0 in January from last month’s 91.7 level. On a broader level, this is not an important piece of data for mortgage markets.  The idea is that a more confident consumer will […]

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The Housing Engine That Won’t Slow Down

January 18, 2007

Housing Starts handily beat economists’ expectations this morning and CPI showed strength, too, sustaining the market momentum that has trended mortgage rates higher over the last 30 days. The Federal Open Market Committee has repeatedly told us that it expects the economy to slow down in 2007, led by a weakening housing market.  And yet, […]

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Why PPI Exceeded Expectations And Nobody Minded

January 17, 2007

With all signs pointing towards economic growth, markets were not all surprised when today’s Producer Price Index registered higher than expected.  Mortgage markets are flat in response to the data. The impact of PPI is muted for three other major reasons, too: At 2.0%, the year-over-year increase in PPI is much lower than it has […]

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How Cold Weather Can Slow Down the Economy

January 16, 2007

As a big chill settles in over the country, oil prices continue their decline and are now down 15% since mid-July.  High oil prices are typically associated with inflation, but given the precarious balance of the U.S. economy, low oil prices may lead to inflation, too. Americans fuel the economy by spending money on goods […]

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