Mortgage Market Weekly – Update June 16, 2014

In This Issue…

Last Week in Review: Retail Sales for May came in less than expected, while important housing news was released.

Forecast for the Week: Key housing, inflation and manufacturing reports are ahead, and the Fed meets.

View: If you have any clients or colleagues who may use Craigslist for an upcoming move, be sure to let them know about a new scam that’s been reported.

Last Week in Review

“You’ve got to be careful if you don’t know where you’re going, otherwise you might not get there.” Yogi Berra. It’s safe to say the Fed is closely watching where our economy is going, as economic reports continue to be mixed.

retail-sales_2014-06-13Retail Sales for May rose by 0.3 percent, led by demand for cars, trucks and home improvement products, though spending eased at most other retailers. The 0.3 percent was less than the 0.7 percent expected and was the lowest level since January’s reading. Retail sales account for about one-third of consumer spending, and are the main driver of U.S. economic activity. Growth in this area is a key factor in our economic recovery.

In housing news, RealtyTrac reported that there was a 5 percent decrease in all types of foreclosures from April to May, with a heavy concentration in the northeast and along the west coast. There was also a 26 percent decrease from May 2013 to May 2014. In addition, Fannie Mae’s May 2014 National Housing Survey revealed that tepid household income and concerns surrounding the U.S. economy are weighing on the housing sector.

And in labor market news, after hitting lows not seen since 2007, weekly Initial Jobless Claims rose by 4,000 in the latest week to 317,000. While the labor markets continue to overcome obstacles, the sector is still under a cloud of uncertainty with so many people looking at long-term unemployment.

What does this mean for home loan rates? Remember that home loan rates are tied to Mortgage Bonds, so when Bonds improve, rates improve. The weakened Euro, the Fed’s Bond-buying program and the tepid economy have been key factors in helping Bonds and home loan rates improve this spring. While Bonds and home loan rates struggled in the latest week, they remain at some of their best levels of the year.

The takeaway is that now remains 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

Housing and manufacturing data dominate the headlines. Plus, the Fed meets.

  • Manufacturing data from the Empire State Index will be reported on Monday, followed by the Philadelphia Fed Index on Thursday.
  • The National Association of Home Builders Housing Market Index will be released on Monday, while Housing Starts and Building Permits follow on Tuesday. These reports will be closely scrutinized for any signs of a slowdown.
  • The Consumer Price Index, which measures consumer inflation, will be delivered on Tuesday.
  • Weekly Initial Jobless Claims will be announced on Thursday.

In addition, the two-day Federal Open Market Committee meeting begins Tuesday, with the monetary policy statement being delivered on Wednesday. Currently, the Fed is purchasing $20 billion per month in Mortgage Bonds and $25 billion per month in Treasury securities in an effort to spur on both economic and job growth. If the Fed further eases back on its purchases, it could spell trouble for Bonds and home loan rates.

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, Bonds and home loan rates stabilized in the latest week due to weaker than expected reports on Retail Sales and Consumer Sentiment. I’ll be watching the markets closely this week, as the Fed meeting could lead to volatility.

Chart: Fannie Mae 3.5% Mortgage Bond (Friday Jun 13, 2014)


The Mortgage Market Guide View…

Watch Out for a New Craigslist Scam
Here’s how to avoid becoming a victim of the latest con targeting bargain hunters who use this classifieds site.
By Cameron Huddleston,, the online classifieds listing for communities across the country, can be a great way to find a good deal on a variety of items, ranging from clothing to furniture to cars. However, the Better Business Bureau is warning bargain hunters that use the site to watch out for a new, elaborate scam.

The scam typically involves listings for big-ticket items, such as a car or boat, at lower-than-average prices. Potential buyers who e-mail the seller are asked to make purchases through a company called Easy Yard Sale. The company has a Web site that looks legitimate, and the seller claims that he is using the company to help quickly sell items he inherited from his deceased father, according to the BBB.

To complete the purchase, buyers are asked to wire money to Easy Yard Sale, which will ship the item. But items are never delivered, and the seller and Easy Yard Sale aren’t responding to e-mails, according to the BBB. At last check the Easy Yard Sale Web site was no longer reachable.

To avoid scams on Craigslist, BBB recommends that you follow these tips:

Meet the seller and see the item. Whenever possible, and especially when you’re buying locally, don’t purchase anything before you actually see it so you know it exists and is in good condition.

Buy directly from sellers, not escrow or shipping services. According to the BBB, there are other scams involving fraudulent services and companies such as Easy Yard Sale that con artists use to make it difficult for bilked consumers to track payments and get their money back. So if a seller asks you to use a third party, request to make the purchase directly from the seller. If he or she balks, it could be a red flag.

Never wire funds or use a pre-paid debit card. Once you send money using these methods of payment, it’s nearly impossible to reverse the transaction or trace the money.

For more on avoiding fraud and identity theft, see our Scams Special Report.

kiplingerReprinted with permission. All Contents ©2014
The Kiplinger Washington Editors.

Economic Calendar for the Week of June 16 – June 20


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