Direction of Mortgage Rates

Hi Everyone,

Here's the latest commentary from our rate lock department:

Not much economic data coming out this week, with the exception of the slighty bearish CPI data released this past Wednesday, which really did nothing to the mortgage markets. The market is off slightly this morning in anticipation of the 5 year treasury note auction.

Weekly jobless claims were lower by 27,000 than the previous week, dropping from a revised 359,000 to 332,000. But, they are still higher than they were for the majority of last year. The four-week moving average pushed up to 328,000. Just a few weeks ago the average was closer to 310,000. Layoffs in construction and manufacturing have been the biggest causes for the increase. Continuing claims actually fell. However, considering that hiring was slower and the unemployment rate rose in January, it is more likely that many of these people have passed their 26-week maximum for collecting unemployment benefits as opposed to finding work. If overall economic activity does soften, then new claims will be in the mid to high 300K range on a consistent basis within the next two or three months.
Based on the lack of data, there will probably be not much market movement the rest of the week.

John Shea
Vice President
Summit Mortgage
781-224-2809 (office)
jshea@summitmortgage.com

Direction of Mortgage Rates

Hello again everyone,

I certainly don't expect to be posting about rates every day but I felt it was important to correct the comments I made yesterday. Unexpectedly, rates got better today. Here's the explaination from our rate lock department:

Retail sales in the U.S. stalled last month as cheaper gasoline limited service station receipts anddealerships sold fewer cars. Purchases excluding fuel and autos increased during the month. January sales were unchanged after a 1.2 percent gain in December that was more than previously estimated, the Commerce Department said today in Washington. Sales excluding autos and gasoline rose 0.5 percent after rising 1 percent in December. Shoppers redeemed gift cards and used the savings from lower gasoline prices to buy winter clothing and home furnishings last month. The figures show an economy that's growing at a moderate pace, a description Federal Reserve Chairman Ben S. Bernanke is likely to share with lawmakers when he begins two days of testimony on Capitol Hill today.

The market liked the retail news and MBS's are slightly better than yesterday's prices. However, we do have Bernarke speaking. It should be along then same vain as what we have been hearing. I do not see the market coming off of the little rally this morning.

John Shea
Vice President
Summit Mortgage
781-224-2809 (office)
jshea@summitmortgage.com

Direction of Mortgage Rates

Hello Everyone,

Here's the current commentary from our rate lock department:

The market after a brief rally in the morning sold off as profit takers came in and sold the market off. This caused most investors who priced early to post a revised rate sheet.

Most of the weeks economic numbers have been neutral to slightly bullish overall, the pinnacle of course was the Fed's statement holding things steady and not changing their inflation expectation. This has a calming effect on the market which I believe will work into the market in the form of a short term rally.

Even though January nonfarm payrolls were considerably weaker than anticipated (111k vs. 206k in December), there were +99k in revisions to the last four months. This means the three-month moving average on nonfarm payroll gains basically held steady at +171k. The private service sector produced 90k jobs in January after averaging +194k in the prior three months. The manufacturing sector continued to lose jobs (-16k vs.-18k previously)-the seventh consecutive decline.

The rest of the employment report was softer. Manufacturing aggregate hours were down 0.8% in the month, pointing to soft production and a declining capacity utilization rate. Overall hours were down 0.1% and set the quarter up for a weak start in terms of GDP, which we have pegged at just under 2%. Average hourly earnings are now more consistent with the employment cost index, up just 0.2% in January after a 0.1% downward revision to +0.4% in December. Over the last year, earnings are up a reasonable 4%. We think the Fed is likely to be happy with this situation.

Translation: We're thinking rates will be steady to slightly down in the short term.

John Shea
Vice President
Summit Mortgage
781-224-2809 (office)