Monday Market Commentary: Mortgage Rates This Week [March 14th 2011]

by Alex Stenback on March 14, 2011

Tougher to write a weekly roundup with the horrifying situation in Japan still unfolding. But for the grace of god (or dumb luck, should you prefer) go we – a stark reminder that this is a violent planet. The show must go on.
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Last Week:
Mortgage rates improved last week, slightly, at most .125%.  “Flight to quality” was the prevailing theme – any time there is political or financial trouble, investors move money away from risk, and into safe-havens.  And there’s plenty of “trouble:” Japan, a smoldering Middle East, early signs of a slowdown in China, and a looming debt crisis in Europe that will fight with Japan for front page space in the coming weeks. 

Right now, the safest of safe havens is United States Treasury debt – so yields dropped all week, and mortgage rates took advantage of the spillover and dropped a little.  Both are at or near four month lows.

This Week:
A big week – against the backdrop of Japan, which will obviously dominate headlines, the markets will try to follow the economic calendar’s version of around-the-horn as we get snapshots of nearly every facet of the economy: Monetary policy, inflation, real estate, employment, and manufacturing/industry will headline the marquis at various points this week.

Say it with me:  Good for economy, bad for mortgage rates.  Inflation spurts higher?  Rates will rise.

Monetary Policy:

[Tuesday] Fed Policy Statement and Rate Decision:The Fed is not going to touch short term interest rates until at least 2012, but investors will be alert to any subtle shifts in language within the policy statement – any surprisingly positive economic statements or emphasis on inflation may spook mortgage rates higher.

Housing:

[Tuesday] NAHB Housing Market Index- A  gauge of home-builder sentiment. Still at very low levels.  Probably a non-event.  A miraculous spike in optimism would still register as very pessimistic in the larger scheme.

[Wednesday] Feb. Housing Starts – This have been going sideways at decades-old lows since the 2007 collapse.  No meaningful improvement – something on the order of 560,000 units are expected.  These are 60′s era numbers. REALLY low.

Inflation:

[Wednesday] Producer Price Index – A measure of wholesale prices.  Higher energy costs will push the headline number up here, but once volatile food/fuel components are stripped from the data, expect little evidence of “core” inflation.  An unexpected spike in this number, especially the core component, could send rates higher.

[Thursday] Consumer Price Index – Expect a similar  story to PPI: Energy and food push the headline higher, but core remains fairly flat.  A hot reading here (especially in the core/ex food-energy component) could easily spike mortgage rates.

Manufacturing:

[Tuesday] Empire State Mfg. – NY Manufacturing is used here as a proxy for national conditions.  This data has shown decent strength and growth, though there has been precious little carryover into labor markets (jobs.)

[Thursday] Industrial Production – The biggest number of the week. Early indications are this will be a strong number, and that is what the markets will expect.  A disappointment here could will help mortgage rates ease.

[Thursday] Philly Fed Survey- A leading indicator for Industrial production.  Has been uptrending – hit a 7 year high last print.  Many expect this to moderate, but if it continues to grow, higher rates may result.

Employment:

[Thursday] Initial Jobless Claims- Weekly jobless claims have been mostly downtrending – last week was an exception, as claims rose by 26K to 397K.  The 4 week average is the most important figure here, so as long as it stays below 400K, there should be no surprises.

View this Week’s Full Economic Calendar [Econoday]
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Watching Mortgage Rates? Follow me on Twitter for running commentary as this weeks mortgage and real estate news unfolds.  If you’d like a rate quote, drop me a line with a few words about what you are looking for, and I will get back to you promptly.
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About:  Alex Stenback is an active mortgage banker with over 12 years experience in the Twin Cities of Minneapolis/Saint Paul [612.749.6999 | http://about.me/alexstenback ]

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