CHARLOTTE METRO REAL ESTATE TRENDS AND STATS

Market Comment - 5/11/2009
May 11th, 2009 3:23 PM
Market Comment - Week of May 11th, 2009

Mortgage bond prices remained unchanged for the week keeping mortgage interest rates steady. Trading remained volatile with rates improving the first portion of week. However, some of the data came in surprisingly better than expected Thursday and Friday which caused mortgage bond prices to fall and rates to rise. The labor cost component of the productivity report along with the Fed Chairman's concerns about the possibility of future inflation caused some steep price declines the latter portion of the week. Unfortunately this eroded most the improvements from Monday and Tuesday. For the week, interest rates finished near unchanged.

The consumer and producer price data will be the most significant economic events this week. Trade and retail sales data may also result in some mortgage interest rate volatility.


Economic Factors
Economic Indicator
Release Date Time
Consensus Estimate
Analysis
Trade Data
Tuesday, May 12, 2009
$29 billion deficit
Important. Affects the value of the dollar. A falling deficit may strengthen the dollar and lead to lower rates.
Retail Sales
Wednesday, May 13, 2009
Down 0.1%
Important. A measure of consumer demand. Weakness may lead to lower rates.
Business Inventories
Wednesday, May 13, 2009
Down 1.1%
Low importance. An indication of stored-up capacity. A significantly large increase may lead to lower rates.
Producer Price Index
Thursday, May 14, 2009
Up 0.1%, Core up 0.1%
Important. An indication of inflationary pressures at the producer level. Decreases may lead to lower rates.
Consumer Price Index
Friday, May 15, 2009
Unchanged, Core up 0.1%
Important. A measure of inflation at the consumer level. Decreases may lead to lower rates.
Industrial Production
Friday, May 15, 2009
Down 0.5%
Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
Capacity Utilization
Friday, May 15, 2009
69%
Important. A figure above 85% is viewed as inflationary. Weakness may lead to lower rates.
U of Michigan Consumer Sentiment
Friday, May 15, 2009
65
Important. An indication of consumers' willingness to spend. Weakness may lead to lower mortgage rates.

Market Conditions

There is a Chinese proverb that states, "May you live in interesting times." It is often argued that the word interesting is meant to be a synonym for turbulent or dangerous. This phrase hits the bull's-eye given the current state of the financial markets.

While stocks and bonds are swinging around wildly there is some good news. Interest rates for conforming and FHA/VA loans are still historically low by many standards.

However, low rates are not a given considering the escalating inflation fears that reemerged recently. Oil prices rose most of last week and Fed Chairman Bernanke expressed concerns about "how to wind down the federal balance sheet" and "avoid inflation." When a Fed official mentions inflation it is generally not positive for bonds. Inflation, real or perceived, erodes the value of bonds causing bond prices to fall and rates to rise. The last thing the economy needs now is rising mortgage interest rates. If inflation emerges that very well may happen despite the continued Fed efforts to keep rates low. With so much uncertainty, a cautious approach to float lock decisions, especially heading into the inflation data this week, would be wise.


Posted in:General
Posted by Philip Jernigan on May 11th, 2009 3:23 PMPost a Comment

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