Mortgage Market Weekly – Update Aug 25, 2014

In This Issue…

Last Week in Review: Key reports indicate that the housing recovery is back on track, while inflation remains tame.

Forecast for the Week: August ends on a busy note, with important reports on housing, inflation, economic growth and more.

View: Need some extra help at the office? Check out these six steps for hiring an intern.

Last Week in Review

“There is nothing as sweet as a comeback.” Anne Lamott. That’s certainly true when it comes to the housing sector, as recent reports indicate that the stall in the housing recovery seen late last year and in recent months may be over.

housing-starts_2014-08-22Housing Starts for July surged by nearly 16 percent to an annual rate of 1.093 million, above expectations and up from the 945,000 in June. Building Permits, a sign of future construction, also came in above expectations while Existing Home Sales for July increased by 2.4 percent from June.

In addition, the National Association of Home Builders Housing Market Index, which is a measure of builder confidence, rose two points to 55 in August from the 53 recorded in July. This was the third straight monthly gain and brings the index to its highest level since the 56 recorded in January. As a rule, 50 is the line between positive and negative sentiment. All in all, these reports are a good sign that the housing sector is coming back strong.

In other news, despite signs earlier this summer that inflation may be heating up, the latest reports show that inflation at the consumer level remains tame. This is good news for Bonds, as inflation reduces the value of fixed investments like Bonds. And since home loan rates are tied to Mortgage Bonds, tame inflation is typically good news for home loan rates as well.

The bottom line is that home loan rates remain near some of their best levels of the year and now is 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

The economic calendar is packed this week with key housing, inflation, manufacturing and economic growth data.

  • Housing news kicks off the week with July New Home Sales on Monday. The S&P/Case-Shiller Home Price Index follows on Tuesday, with Pending Home Sales for July being reported Thursday.
  • We’ll get a sense of how consumers are feeling with Consumer Confidence on Tuesday and the Consumer Sentiment Index on Friday.
  • Look for Durable Goods Orders (i.e. orders for items that last for an extended period of time) on Tuesday.
  • Important news is ahead Thursday with the second reading of second quarter Gross Domestic Product.
  • Weekly Initial Jobless Claims will also be reported on Thursday. Claims continue to hover near the 300,000 mark.
  • Friday wraps up the week with Personal Income, Personal Spending and Personal Consumption Expenditures, the Fed’s favorite measure of inflation. Regional manufacturing news via the Chicago PMI will also be reported.

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 improved in the latter part of the week despite the positive housing data. Home loan rates remain near some of their best levels of the year and I’ll continue to monitor them closely.

Chart: Fannie Mae 4.0% Mortgage Bond (Friday Aug 22, 2014)


The Mortgage Market Guide View…

6 Steps for Hiring an Intern

Hiring an intern is a win-win. The intern gains valuable skills and experience. You gain extra help on a temporary basis. Follow these six steps to hire an intern:

  1. Create a clear, meaningful job description. Do you need someone to focus on a special project or a social media coordinator to expand your social media outreach? Include the time commitment (usually up to 20 hours per week) and preferred work hours. Finally, outline the compensation (e.g., hourly wage or stipend).
  2. Recruit candidates. Turn to social media, your networks, and local colleges and universities. Provide the job description for reference.
  3. Prepare a workspace. Your intern will need a computer and a comfortable space. A phone may be necessary if the intern is calling contacts on your behalf.
  4. Plan for mentoring and supervision. Your intern will be learning everything from job responsibilities, to appropriate dress code, to performance expectations, and office protocol. Plan for guidance every step of the way.
  5. Give specific feedback. Concrete praise encourages a repeat performance. Concrete constructive feedback allows for corrective action. If you work with a college, you may have additional requirements of reporting to an internship coordinator or having a site visit.
  6. Offer to be a reference. Internships aren’t expected to lead directly to a job with the host company. Offer to be a reference and speak about your interns’ job responsibilities and strengths with their prospective employers.

As always, please feel free to pass these tips along to your team, colleagues and clients.


Economic Calendar for the Week of August 25 – August 29


The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is without errors.

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

Don Parsons
Commerce Mortgage – NMLS 2105
450 Newport Center Drive Suite 350
Newport Beach, CA 92660
2130 Main Street Suite 260
Huntington Beach, CA 92648