A Mortgage Update from Jay Skwierawski for the week of May 11
Hello Everybody!
Mortgage rates ended last week pretty much where they started, as mixed economic news pushed rates both lower and higher. The end result was that the market finished almost dead even on the week.
Before we get to last week's news, I want to be sure to tell you to watch for today's "Mortgage Minute (or two)," which will have information on "Declining Market" designations and how it could affect your business in the future.
There was not a lot of news released last week, but there was enough to shake up the markets a bit:
On Wednesday, Productivity in the nation's factories was reported up 2.2%, which was better than expected. That means that factories were producing more. However, looking into the report, it appeared that a lot of those goods being produced were ending up as inventory, instead of being sold. The more inventory there is, the less likely that factories have to continue to produce at such a brisk pace. Also on Wednesday, U.S. crude oil inventories were reported to be almost one and a half times the expected amount. This usually helps the price of oil, but the cost of a barrel of crude oil (black gold, Texas tea) continued its trek higher to never before seen highs of $126 per barrel. This does not bode well for inflation fearing treasury and mortgage bonds. On Thursday, first time unemployment claims came in slightly lower than expected, but the four week moving average continued its move into recessionary levels. And finally, on Friday, we had the U.S. Trade Balance coming in better than expected. The two biggest news items for the week were the cost of oil and the news that insurance giant American International Group (AIG) had a loss last quarter of $7.81 Billion, compared to income of over $4 Billion for the same quarter last year. This took some wind out of the sails of the people that are thinking that the credit crisis is nearing an end. AIG is one of the largest insurers of mortgage bonds.
This week, there is more market moving news set to be released, including:
Tuesday - Retail Sales for April, which are expected to show no increase over March's numbers - (HIGH impact on rates)
Wednesday - The CPI (Consumer Price Index) and Core CPI (less food and energy) is set to be released (HIGH)
Wednesday - Crude oil inventories (Moderate)
Thursday - Philadelphia Fed Index of activity on the east coast (HIGH)
Thursday - First time unemployment claims for last week (Moderate)
Thursday - Industrial Production and Capacity Utilization (Moderate)
Thursday - Empire State Index showing activity in New York (Moderate)
Friday - Building Permits and New Housing Starts (Moderate)
Friday - Consumer Sentiment (Moderate)
In addition to the news listed above, the markets will continue to focus on earning and losses from large mortgage companies and banks, as well as the cost of oil.
The chart above shows the movement of the price of mortgage bonds over the last three months. The most recent days are shown on the right side. Remember that green and up are good, red and down are bad! As you will notice, the week ended up on Friday (lower end of red bar) almost exactly where it started the week. The market sold off on Friday with the price of oil increasing to $126 per barrel.
We will keep you posted on any major movements in the market.
Thank you and have a great week!
Jay Skwierawski
President
First Sterling Mortgage Services, LLC
737 North Michigan Avenue, #1900
Chicago, IL 60611
312.268.7601
WE CLOSE ON TIME - EVERY TIME!
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