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Inflation Hot, GDP Not



Last Week in Review: Housing, GDP and inflation news made headlines, but were the numbers friendly to Mortgage Bonds and home loan rates? 

Forecast for the Week: All eyes will be on the February Jobs Report.



"Oh, I get by with a little help from my friends." The Beatles. News headlines shared the latest word on housing sales, Gross Domestic Product and inflation ... helping home loan rates remain in historically low territory. 

In housing news, January Existing Home Sales edged 0.4 percent higher from December to an annual rate of 5.47 million units, according to the National Association of REALTORS®. The increase was the highest level since July 2015. In the past year, sales are up 11 percent, the largest year-over-year gain since the 16.3 percent annual rise in July 2013. January New Home Sales, on the other hand, fell 9.2 percent from December. 

The second reading of Gross Domestic Product (GDP) from the final quarter of 2015 showed growth of 1 percent, above the 0.4 percent expected and the 0.7 percent recorded in the first reading. GDP is one of the primary gauges of the health of our country's economy and represents the total dollar value of all goods and services produced over a specific time period. Readings should be at least 2.5 percent to signify growth. 

Finally, inflation, as measured by the Core Personal Consumption Expenditures index, rose 0.3 percent in January from December and year-over-year 1.5 percent. Inflation is not Bond-friendly news, meaning it also isn't a good sign for home loan rates, which are tied to Mortgage Bonds. While inflation has not been an issue for some time, after the rise in January's Core Consumer Price Index as well, it is definitely something to monitor. 

The mix of news held Mortgage Bonds fairly steady the past week, helping keep home loan rates near historic lows.

Freddie Mac last week released the results of its Primary Mortgage Market Survey(PMMS®), showing fixed mortgage rates resuming their decline and aiding homebuyer affordability amid a tight supply of for-sale homes in many markets.

News Facts:

30 Year Fixed Rate Mortgages(FRM) averaged 3.62 percent with an average 0.6 point for the week ending February 25, 2016, down from last week when it averaged 3.65 percent. A year ago at this time, the 30-year FRM averaged 3.80 percent.

Attributed to Sean Becketti, chief economist, Freddie Mac.

"Yields on the 10-year Treasury continued their downward trend this week after a small rally the previous two weeks. The 30-year mortgage responded, falling 3 basis points to 3.62 percent. Since the beginning of 2016, 30-year rates have fallen almost 40 basis points helping housing markets sustain their momentum into this year.”



While manufacturing and housing data abound this week, February's Jobs Report could be the market mover.

  • Economic data kicks off Monday with the Chicago PMI report along with Pending Home Sales.
  • On Tuesday, the ISM Index will give a national view of manufacturing.
  • Wednesday brings the first of two key labor market reports with the ADP National Employment Report. The Fed's Beige Book will also be released.
  • Weekly Initial Jobless ClaimsProductivity and the ISM Services Index will be released on Thursday.
  • The week culminates with the February Jobs Report, which includes Non-farm Payrolls, the Unemployment RateAverage Work Week and Hourly Earnings.

When you see these Bond prices moving higher, it means home loan rates are improving. When Bond prices are moving lower, home loan rates are getting worse. 


By: Michael Borodinsky

Vice President/Regional Builder Branch Manager | Caliber Home Loans

NMLS #460228








Call Michael: 732-382-2654

Email Michael:

Follow Michael on Twitter: @mikeborodinsky



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