CHARLOTTE METRO REAL ESTATE TRENDS AND STATS

Market Comment - Week of December 14th, 2009
December 14th, 2009 4:02 PM
Market Comment - Week of December 14th, 2009

Mortgage bond prices were near unchanged last week holding mortgage rates steady. Trade was extremely volatile with swings of 1/2% in discount points common. The Treasury auctions were not as well received by foreign accounts as traders were hoping. The US relies on foreign central banks such as China to fund our deficit spending. If China were to decrease or cease purchasing US bonds and notes, rates would rise.

Interest rates finished the week near unchanged.

The inflation data will be the most important releases this week. Inflation erodes the value of fixed income securities causing prices to fall and rates to rise. The Fed meeting will also take center stage. While no rates changes are expected the wording of the release will be very important.


Economic Factors
Economic Indicator
Release Date Time
Consensus Estimate
Analysis
Producer Price Index
Tuesday, Dec. 15, 2009
Up 0.9%, Core up 0.2%
Important. An indication of inflationary pressures at the producer level. Weaker figures may lead to lower rates.
Industrial Production
Tuesday, Dec. 15, 2009
Up 0.6%
Important. A measure of manufacturing sector strength. A lower than expected increase may lead to lower rates.
Capacity Utilization
Tuesday, Dec. 15, 2009
71.1%
Important. A figure above 85% is viewed as inflationary. A decrease may lead to lower mortgage interest rates.
Housing Starts
Wednesday, Dec. 16, 2009
Up 8.6%
Important. A measure of housing sector strength. Weakness may lead to lower rates.
Consumer Price Index
Wednesday, Dec. 16, 2009
Up 0.7%, Core up 0.1%
Important. A measure of inflation at the consumer level. Lower than expected increases may lead to lower rates.
Fed Meeting Adjourns
Wednesday, Dec. 16, 2009
No rate change
Important. Few expect the Fed to raise rates, but some volatility may surround the adjournment of this meeting.
Leading Economic Indicators
Thursday, Dec. 17, 2009
Up 0.7%
Important. An indication of future economic activity. A smaller increase may lead to lower rates.
Philadelphia Fed Survey
Thursday, Dec. 17, 2009
16.5
Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates.

Trading Conditions

As we all know, mortgage interest rates change on a daily and intra-day basis. With so much volatility, it is often difficult to make the right decision regarding floating or locking. What is important to remember is the fact that there is a difference between gambling and taking a calculated risk when making mortgage interest rate decisions. Floating into an economic release such as the employment report is usually a gamble, as was evident with the rate spike the beginning of this month. In addition, floating over a span of more than a few days is also a gamble. Unforeseen events can cause instability in the financial markets that results in mortgage interest rate volatility. On the contrary, floating on a day of positive market movement with no economic data the following day, while such action is still vulnerable to market movements, can be considered a calculated risk. It is possible for interest rates to push lower due to the uncertain future of the economy. Unfortunately the recent focus has been towards rate increases, which generally don't bode well for lower mortgage interest rates. Taking advantage of rates at the current levels guarantees a historically favorable interest rate and protects against uncertainty surrounding future interest rate developments.


Posted in:General
Posted by Philip Jernigan on December 14th, 2009 4:02 PMPost a Comment

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