Mortgage Market Weekly – Update June 20, 2014

In This Issue…

Last Week in Review: Housing is cooling, inflation is warming and the Fed announced more tapering.

Forecast for the Week: Important housing, inflation and consumer confidence reports are ahead. Plus, we’ll get news on the state of our economy with the final reading for first quarter Gross Domestic Product.

View: Good communication skills are critical to succeeding in business. Mastering the art of telling a good story is a key component.

Last Week in Review

“You’re hot then you’re cold.” Katy Perry. Inflation is heating up, while the housing market shows signs of cooling. Meanwhile, the Fed continues to taper its massive Bond-buying program at a steady pace.

top-image_2014-06-20The hot housing market from 2013 is cooling off as the second half of 2014 approaches. May Housing Starts fell by 6.5 percent from April to an annual rate of 1.001 million units. Housing Starts measure the number of new residential construction projects during any particular month. Meanwhile, Building Permits, a sign of future construction, declined by 6.4 percent to an annual rate of 991,000. In addition, Freddie Mac’s 2014 Economic and Housing Outlook revealed that single-family housing remains weaker than Freddie Mac projected six months ago, while multi-family dwellings appears to be on track.

There was some positive housing news, as the National Association of Home Builders Housing Market Index rose to 49 in June, up from 45 recorded in May. The reading for June is one point shy of the 50 threshold, the level that’s considered good for new construction conditions.

On the inflation front, the Consumer Price Index for May came in hotter than expected. This is significant because inflation erodes the value of fixed assets like Mortgage Bonds. And since home loan rates are tied to Mortgage Bonds, hotter inflation could spell trouble for home loan rates as we move further ahead this year. Also of note, the Federal Reserve announced that it will continue to taper its massive Bond-buying program. Beginning in July, the Fed will purchase $15 billion in Mortgage Bonds and $20 billion in Treasuries per month, an overall decrease of $10 billion.

What does this mean for home loan rates? Tensions overseas, the Fed’s Bond-buying program and weak economic reports have been key factors in helping Bonds and home loan rates improve this spring. However, hotter inflation could spell trouble and it’s something to watch closely in the weeks and months ahead.

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

A busy week is ahead, with key reports on housing, inflation, consumer confidence and the state of the U.S. economy.

  • Housing data is plentiful this week, beginning with Existing Home Sales on Monday. Look for the S&P/Case-Shiller Home Price Index and New Home Sales on Tuesday.
  • Also on Tuesday, we’ll get a read on how consumers are feeling with Consumer Confidence for June. The Consumer Sentiment Index will be released on Friday.
  • On Wednesday, the final reading for first quarter Gross Domestic Product will be closely watched. Also look for Durable Goods, which measure orders for products that last an extended period of time.
  • Weekly Initial Jobless Claims will be announced on Thursday, along with Personal Income, Personal Spending, and Personal Consumption Expenditures, a key inflation measure.

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 been holding steady in a sideways pattern. Home loan rates remain near historic lows and I’ll continue to monitor them closely.

Chart: Fannie Mae 3.5% Mortgage Bond (Friday Jun 20, 2014)

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The Mortgage Market Guide View…

Inspire Clients and Colleagues With Better Business Storytelling

Telling a good story isn’t always easy. But learning to tell a good story is imperative for leadership, improved communication skills and succeeding in business today.

In fact, Daniel Goleman sheds some light on this in the opening paragraph of his book, Primal Leadership. Goleman writes, “Great leaders move us. They ignite our passion and inspire the best in us.”

Speaker, agent for social change, catalyst and author Kevin Carroll says that one of the main ways leaders move us is through their ability to tell stories. As he explains it, leaders must communicate a variety of information to people, but the best leaders have learned to attach meaning to the information they communicate, so their listeners become invested and motivated by what’s said.

The bottom line: Storytelling helps great leaders reach people, inspire people and galvanize people around an idea so that the idea becomes a reality.

Need some storytelling help? Turn to the pros: Pixar’s 22 Rules of Phenomenal Storytelling are listed right here on a handy, easy to read infographic.

As always, feel free to pass these tips along to your team and colleagues to help them improve their storytelling and communication skills!

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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.

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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

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