Caroline's Weekly Market Review & Kwest Mortgage News

Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac.Mortgage rates drifted downwards this week amid signs of a weakening economic recovery. Retail sales rose 0.2 percent in August which was nearly half of July's 0.4 percent increase. In addition, industrial production in August grew 0.4 percent, less than the market consensus forecast. And lastly, consumer sentiment fell for the second consecutive month in September to the lowest reading since April. This, in part, was why the Federal Reserve chose to maintain its MBS and bond-buying program at its September 12th and 13th monetary policy committee meeting. It also cited the tightening of financial conditions observed in recent months, which in the case of the housing market means the rise in mortgage rates since May."

 

This week will bring fewer and less impactful reports when compared to last week. The German elections being held on Sunday could have an effect on the global financial markets. The outcome will determine Germany’s position on critical EU issues like, bailouts, banking system reform, and austerity measures, which will influence the pace of economic growth for the EU. Here at home, Durable Orders and New Home Sales will be released on Wednesday. On Thursday, Pending Home Sales and the final revisions to the second quarter GDP will be released. Personal Income and Core PCE inflation (the Fed’s preferred inflation indicator) will come out on Friday. Consumer Sentiment and Consumer Confidence will round out the week. Also, there will be Treasury auctions on Tuesday, Wednesday, and Thursday.

 

Rates are still at low levels. Now is the best time to meet with your mortgage professional to discuss a mortgage solution to meet your financial goals.

 

On Another Note:

Kwest Mortgage is looking for an employee!!

Great things, Small businesses like ours creating jobs. We need help though. Please share the word. We are good, but have a need for an additional Kwest team member with the same drive and passion we have for helping consumers. We know they are out there. Just have to find the right one.

Click on the link below for a full job description and details for the position!

 

http://kwestmortgage.com/about_us/career-opportunities/

 

 

Caroline's Weekly Market Review

Ahead of this week's highly important Fed meeting, there was little significant news last week. The US plans for Syria will take some time to decide, so it had little influence on mortgage rates. The majority of the economic data released last week fell short of expectations, which helped mortgage rates end the week a little lower.

The last major economic growth data before Wednesday's Fed meeting, the Retail Sales report, showed a modest pace of growth. As was the case with last week's Employment data, it is fortunate to have steady growth, but expectations were for greater strength. Consumer Sentiment, which measures consumer expectations for future economic growth, dropped from recent multi-year highs. Investors have been closely watching the Jobless Claims reports in recent weeks for hints about the performance of the labor market, but this week's data was rendered inaccurate by a very unusual issue. Labor Department officials announced that two states were upgrading their computer systems and were unable to collect all the claims during the week.

The Retail Sales report was essentially the last data which could significantly influence the Fed's decision this week. Investors have now set their expectations. Despite the modest pace of economic growth, investors anticipate that the Fed will begin to taper its bond purchases, but now by a relatively small amount. The consensus is that the Fed will scale back from its current pace of $85 billion per month of combined Treasury and mortgage-backed securities (MBS) purchases to $70 or $75 billion per month. Some investors expect the Fed to reduce only Treasury purchases, while others think it will be split. Investors also will be interested in hearing how the Fed will determine future changes in the bond purchase program.

The long awaited, highly anticipated Fed statement will come out on Wednesday around 2:00 et. A press conference with Fed Chief Bernanke will follow at 2:30 et. There almost certainly will be a large reaction in the mortgage market to the statement. The other economic events next week will struggle to compete for attention. Industrial Production will be released on Monday. The Consumer Price Index (CPI), the most closely watched monthly inflation report, will come out on Tuesday. CPI looks at the price change for those finished goods which are sold to consumers. Housing Starts will be released on Wednesday, and the Existing Home Sales report is scheduled for Thursday. Philly Fed and Empire State will round out the Economic Calendar.

Kwest Home Spotlight 9/13/13

Caroline's Weekly Market Review

A lack of US military action in Syria caused investors to reverse last week's safety trade, while mixed economic data was roughly neutral. As a result, mortgage rates ended the week higher.

Since Fed officials have tied future policy changes to the performance of the economy, investors have reacted strongly to incoming economic data. Nearly all of the data released ahead of Friday's Employment report was strong. The ISM Manufacturing and ISM Services data rose to multi-year highs. Construction Spending posted solid gains. Jobless Claims remained close to five-year lows. The Fed's Beige Book reported that economic growth remained healthy. In short, all signs pointed to a clear path for the Fed to begin to slow the pace of its bond purchases.

The final, and biggest, piece of the puzzle broke the pattern, however. Friday's highly anticipated Employment report fell short of expectations in nearly every area. This was bad news for the economy, but it was favorable for mortgage rates. Against a consensus forecast of 175K, the economy added 169K jobs in August, but the figures from prior months were revised lower by 74K. The Unemployment Rate unexpectedly declined from 7.4% to 7.3%, the lowest level since December 2008. Digging deeper, though, the details revealed that the decline was entirely due to people dropping out of the labor force rather than job gains. The labor force participation rate (the percentage of people able to work who are working or are looking for work) dropped to the lowest level since 1978. The Employment report caused investors to question whether the Fed will begin to taper its bond purchase program at its next meeting.

This week, the big day will be Friday when Retail Sales, PPI, and Consumer Sentiment will be released. Retail Sales account for about 70% of economic activity. The Producer Price Index (PPI) focuses on the increase in prices of "intermediate" goods used by companies to produce finished products. Import Prices will be released on Thursday. There will be Treasury auctions on Tuesday, Wednesday, and Thursday. The highly anticipated Fed announcement will come out on September 18.

Caroline's Weekly Market Review

Increased concerns about the conflict in Syria caused investors to shift to safer assets this past week. Mixed economic data was roughly neutral. As a result, mortgage rates ended the week a little lower.

Concerns about the reported use of chemical weapons by the Syrian government and the possibility of increased US involvement has resulted in greater uncertainty in financial markets. Investors reacted by shifting from riskier assets such as stocks to safer assets such as bonds, which helped mortgage rates. It also resulted in higher oil prices. When energy costs rise, economic growth slows, and this also benefits mortgage rates.

The other major focus for investors remains the timing for the Fed to begin to taper its bond purchase program. The economic data released last week was split between positive and negative surprises, however, which provided little reason for investors to change their expectations for Fed policy. The big upside news this week was that second quarter GDP was revised higher from 1.7% to 2.5%. On the downside, the Durable Orders data showed a large decline. Consumer Confidence and Consumer Sentiment increased, while Pending Home Sales fell. All in all, this week's mixed bag of data created volatility for mortgage rates, but it had little net impact.

The big story next this will be Friday's Employment report. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month, and it will carry even more weight than normal due to how it will influence Fed policy. Earlier in the week, ISM Manufacturing and Construction Spending will be released on Tuesday. The Fed's Beige Book and the Trade Balance are scheduled for Wednesday. ISM Services, ADP Employment, Productivity, and Factory Orders will come out on Thursday.

 

On A Side Note: I hoe you and your family had a very happy Labor Day!!