IN THIS ISSUE
Last Week in Review: Market volatility has hurt Mortgage Bonds and home loan rates in recent weeks, while readings for consumer spending rebounded.
Forecast for the Week: The calendar is packed with housing, manufacturing and inflation reports. Plus, the Fed meeting is sure to make headlines.
LAST WEEK IN REVIEW
"It's a cruel, cruel summer." Bananarama.
The warmer weather has not been kind to Mortgage Bonds, as recent volatility has caused them to fall below important technical levels. But will it be a "cruel summer" for them, or is a rebound ahead?
The warmer weather has proved to be positive in some respects, as Retail Sales rose by 1.2 percent in May, a big jump from the 0.2 percent recorded in April. Retail Sales measures total receipts of retail stores from samples representing all sizes and kinds of business in retail trade throughout the nation. It is the most-timely indicator of broad consumer spending patterns. Consumer spending is an important piece of the U.S. economy, making up about 70 percent of the nation's economic activity. May's reading has boosted hope that the U.S. economy will continue to gather some steam.
Fannie Mae released its May 2015 National Housing Survey. Of note, 66 percent of respondents say it's a good time to buy a home while 49 percent feel it is a good time to sell a home, the latter being a new high for the survey. In addition, research firm CoreLogic reported that completed foreclosures are down nearly 20 percent from April 2014 to April 2015.
Looking ahead, the upcoming Federal Open Market Committee meeting could add even more volatility to the markets, especially if members hint about rate hikes down the road, possibly in September or October. With Mortgage Bonds and home loan rates near some of their worst levels of 2015, will they be able to reverse course and improve? Or will it be a cruel summer indeed?
The bottom line for right now is that home loan rates remain near historically low levels, meaning now is still a great time to consider a home purchase or refinance. Let me know if I can answer any questions at all for you or your clients.
FORECAST FOR THE WEEK
Key housing, manufacturing and inflation reports are ahead. Plus, the Fed meeting could cause even more volatility.
- Look for news from the manufacturing sector with the Empire State Index on Monday and the Philadelphia Fed Index on Thursday.
- The NAHB Housing Market Index will be released on Monday, followed by Housing Starts and Building Permits on Tuesday.
- Thursday brings key inflation news via the Consumer Price Index, as well as Weekly Initial Jobless Claims.
Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond on which home loan rates are based.
When you see these Bond prices moving higher, it means home loan rates are improving—and when they are moving lower, home loan rates are getting worse.
To go one step further—a red "candle" means that MBS worsened during the day, while a green "candle" means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.
As you can see in the chart below, Mortgage Bonds have halted their plunge in recent days. I'll be watching closely to see if this trend continues.
Chart: Fannie Mae 3.5%% Mortgage Bond (Jun 12, 2015)
Economic Calendar for the Week of June 15 - June 19
By: Michael Borodinsky
Vice President/Regional Builder Branch Manager | Caliber Home Loans
Call Michael: 732-382-2654
Email Michael: Michael.Borodinsky@caliberhomeloans.com
Follow Michael on Twitter: @mikeborodinksy