Weekly Mortgage Market Update: August 29th, 2011

by Alex Stenback on August 29, 2011

Last Week:

Mortgage rates drifted higher last week, with 30 year fixed rates adding about .125% for the week, and a full .25% increase since the near-term (and all time) low set on August 10th.

The most significant news last week was Ben Bernanke’s vaguely optimistic statements from Jackson Hole, Wyoming.  Here the Kansas City Fed held it’s annual conclave of economic smarties, and all channels were tuned to detect any hints from the Chairman that the Fed would embark on a new campaign of monetary stimulus.

While Bernanke did not mention or telegraph any specific policy action, he delivered much in the way of “Fed at the ready” pablum that suggested to some there may be additional stimulus forcoming, perhaps as early as the Sept 20th Fed meeting.

For their part, stocks managed to improve over the course of the week, which was the driver for the slight increase in mortgage rates.

This Week:

A loaded calendar, with the potential for apple-cart upsetting news out of the Eurozone and their debt debacle, may make this an interesting week. Keeping in mind the opeative dynamic of interest rate markets: Good news for economy = bad news for rates.

On the calendar proper, this morning’s PCE Report (Personal Consumption and Expenditures) hinted at inflation and increased spending, which was enough to send stocks on a 253 point romp (DOW). This hurt mortgage markets a little and the rate pictured worsened slightly.

Tuesday we get Case-Schiller home prices, and the Minutes from the last Fed meeting – of particular interest will be additional details on the 3 voting Fed membes who dissented from the prior Fed announcement.

Midweek, we’ll see a series of reports on manufacturing and general business conditions. Chicago PMI (reports on Chicago business conditions as a proxy fo the national picture) on Wednesday. The ISM Index, which is the benchmark index for the manufacturing sector of the economy, on Thursday. Weakness expected in both, and ISM is expected to drop into contraction for the first time since the official end of the recession – a surprise positive reading in either of these reports could push mortgage rates higher.

End of the week will qualify as red-meat for markets, as all focus goes to the employment picture. On Wednesday, ADP (nations largest payroll firm) issues it’s private-sector-only report. Spotty track record in predicting actual employment data notwithstanding, this report can move markets, as can the weekly jobless claims which just cannot cross beneath the psychologically significant less-than-400K-new-claims barrier. Improvements in either of these reprts have yet to materialize, and more of the same expected.

Friday of course is the Bureau of Labor and Statistics Employment report – a lot of chatter about an ugly number here, with some outlets on record expecting a decline of 5K jobs. For perspective: 250k jobs created per month barely keeps up with workforce growth, and we have a three year deficit of dissafected, unemployed, and under-employed workers to contend with. In other words, no matter how good (or bad) this report looks, we still have a long, long road back to anything resembling full employment and a healthy labor market.

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