Mortgage Market Weekly Update – March 14, 2014

In This Issue

Last Week in Review: Several key economic reports were better than expected. How did home loan rates respond?

Forecast for the Week: The calendar is filled with important housing, inflation, and manufacturing reports. Plus, the Fed meets.

View: Keep your identity safe with these easy smartphone tips.

Last Week in Review

“No matter how long the winter, spring is sure to follow.” Proverb. This winter certainly has been a long one for much of the nation, with many hoping spring makes a quick arrival. As temperatures slowly begin to thaw, recent economic reports reflect an economy in bloom.

After falling for two months, Retail Sales rose by 0.3 percent in February, above expectations, as consumers purchased a variety of goods despite the harsh winter weather. This is important because Retail Sales make up about one-third of consumer spending, which is the main driver behind economic growth. If consumer spending can continue to expand, economic growth could go beyond the recent 2 percent levels we have seen the past few years. This will be good news for our economy.

The labor market also showed signs of life last week, as Initial Jobless Claims fell to 315,000, the lowest level since the end of November. And there was good news on the housing front, as RealtyTrac reported that foreclosure filings in February declined by 10 percent from January, and are down a whopping 27 percent from the same period last year.

What does this mean for home loan rates? Typically, good economic news benefits Stocks at the expense of Bonds, as investors try to take advantage of gains. However, fears of an economic slowdown in China and tensions in the Ukraine helped Mortgage Bonds improve due to safe haven trading. And as home loan rates are tied to Mortgage Bonds, this was good news for rates as well.

In addition, it’s important to remember that the Fed is now purchasing $35 billion in Treasuries and $30 billion in Mortgage Bonds (the type of Bonds on which home loan rates are based) to help stimulate the economy and housing market. This is down from the original $85 billion per month that the Fed had been purchasing. The Fed is meeting again this week, and additional tapering could be announced on Wednesday. This decision is sure to impact the markets and home loan rates, and it’s an important story to monitor.

The bottom line is that now remains a great time to consider a home purchase or refinance, as home loan rates remain attractive compared to historical levels. Let me know if I can answer any questions at all for you or your clients.

Forecast for the Week

A cornucopia of economic data will be released this week.

  • Monday kicks off with manufacturing numbers from the Empire State Index, followed by more manufacturing news Thursday with the Philadelphia Fed Index.
  • Tuesday brings along the closely watched Consumer Price Index, which will give us a read on inflation at the consumer level.
  • Several key housing reports will be released, including the National Association of Home Builders Housing Market Index on Monday, Housing Starts and Building Permits on Tuesday, and Existing Home Sales on Thursday.
  • Also on Thursday, Weekly Initial Jobless Claims will be released.

In addition, the regularly scheduled two-day Federal Open Market Committee meeting will begin on Tuesday. The last two meetings in December and January ended with the Fed tapering its Bond and Treasury purchases by $5 billion each. Will more tapering follow?

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 were able to improve at the expense of Stocks last week. With the Fed meeting and a slew of economic data this week, I’ll be watching the markets closely for the latest developments.

Chart: Fannie Mae 4.0% Mortgage Bond (Friday Mar 14, 2014)

The Mortgage Market Guide View…

Tech Tips
Identity Theft and Smartphones

What’s not to like about smartphones? They can handle just about any task from to-do lists to email, making life easier and helping save both time and effort when you’re out of the office or spending the day with clients. Ironically, it’s these same conveniences that make mobile devices so attractive to identity thieves.

With that in mind, here are three easy ways to keep your identity safe when using your smartphone:

  1. Keep your operating system up to date. Manufacturers are always updating operating software and closing loopholes on hackers, so make sure you don’t ignore updates. Consider setting a calendar reminder to check for these regularly.
  2. Install a mobile antivirus app. Mobile antivirus and anti-phishing tools are a must, even if you have to pay a little extra for the protection. Search your app marketplace and make sure to read user and online reviews before you buy.
  3. Don’t enter passwords on public Wi-Fi. Cyber crooks can pick up a lot of information about you right out of the air, even your keystrokes. Avoid entering passwords unless you have anti-virus software enabled. Also, shut off Bluetooth discoverability when you’re out and about.

Please feel free to pass these tips along to your team, clients, and colleagues.

Economic Calendar for the Week of March 17 – March 21


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Don Parsons
Commerce Mortgage – NMLS 2105
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