Mixed Data Weigh on Mortgage Rates, Economy – Daily Mortgage Rate Update for July 15th, 2010
Unemployment claims fall; Inflation turns negative; Industrial production continues to increase; Pace of foreclosures slowing? 30-year fixed rates average 4.57% – Daily Mortgage Rate Update for July 15th, 2010
As I mentioned earlier this week, a substantial amount of market-swaying data was loaded into the end of this week. Much of that data hit today, and the results could not have been more mixed. Let’s take a look at this data.
New unemployment claims dropped 29,000 to 429,000, approaching the economically significant 400,000 mark that better matches an economic situation with meaningful job growth. Unemployment claims below 400,000 are believed to more frequently reflect frictional unemployment, that is, selective firing or layoff of a few workers, as opposed to cyclical unemployment, typically associated with larger layoffs due to a negative point in the business cycle. At this point, it is too early to say that this week’s result is not simply an aberration. The 4-week moving average is a better indicator of the true trend in unemployment claims, and that did fall, dipping to 455,250, however, at that level it is difficult to claim that the job market is truly improving yet.
The Producer Price index, an indication of inflation at the wholesale level, fell for the third month in a row, declining by 1/2% in June as more volatile food and energy costs dropped sharply. If you like tomatoes, this is very good for you, as much of the decline was tied to a decrease in prices for that fruit as an earlier run-up in prices unwound. Excluding those more volatile components, prices rose 0.1%, a level low enough as to allow the Federal Reserve to maintain low interest rate targets almost indefinitely. Inflation is the natural enemy of low interest rates, as investors in fixed-income securities expect, at a minimum, that those securities’ earnings will outpace inflation.
There were three key measures of manufacturing activity today, with mixed results. Both the Empire State manufacturing index from the New York Federal Reserve, and the Philadelphia Federal index, showed declines in growth. This doesn’t mean that factories are closing, just that they’re expanding production at a slower rate. Meanwhile, national industrial production was measured as growing 0.1%. This is better than nothing, but not nearly the rate needed to hasten the exit from the economic crisis.
Some meaningful mortgage data was also released today. According to RealtyTrac, a company that specializes in online marketing of foreclosed properties, the pace of foreclosures slowed by about 5% from the 2nd half of 2009 to the first half of 2010. This is encouraging to those concerned about the excessive inventory of homes listed for sale, but brings questions to others worried about a “shadow inventory” of homes that banks haven’t completed repossessing due to the glut of other homes on the market. Some economists have suggested that the there are as many as 2 homes worth of this shadow inventory for every home currently on the market, and that could hurt future sales.
Freddie Mac reported the results of its weekly mortgage market survey, confirming that rates remain at historically low levels. The average 30-year fixed rate for this week stands at 4.57%, the lowest level ever recorded in the 40+ year history of the Freddie Mac survey. At this level, refinancing makes sense for many families who though they had done it for the last time 1-2 years ago when they locked in a rate between 5.25% and 5.75%. If you currently have a 30-year fixed mortgage with a rate 5.5% or higher, you should contact your mortgage advisor for a checkup.
Earlier this week, successes from some major companies in the 2nd quarter made it appear that we might see a turn-around in economic data, but today’s data was pessimistic at best, and tomorrow’s data is now much more likely to be similar. While pricing is at historically low levels, there is now something to gain by waiting to lock a rate, and risks have subsided. I feel it is safe to float for today, and likely on into the next day if tomorrow’s data confirms what we’ve seen today. There are still some risks, but mortgage pricing recently tried, and failed, to move to a lower level.
Tomorrow, we will hear from the Commerce Department with its monthly Consumer Price Index, and from the University of Michigan on consumer sentiment. Based on recent information, I’m expecting the CPI will show negligible price increases, and I suspect that consumer sentiment will have soured more than previously expected. If you have questions regarding Rhode Island Refinance Rates, or whether or not to lock your loan, please don’t hesitate to contact me by cell at (401) 263-8655, or by commenting on this post. Have a great day!
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Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.
July 15, 2010 by Dan Hartman · 1 Comment
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I have worked as a residential mortgage advisor since February of 2000 and a part of the founding team here at Province Mortgage. We believe that by doing right by a family today, we can create a relationship for life, and, hopefully, and ambassador who will share the experience with others. It is our team of professionals that helps us to create this experience.
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[...] On Thursday, the proverbial wet blanket hit Wall St. jarringly. While unemployment claims declined, growth in industrial activity slowed sharply, suggesting that the strength of the current economic recovery may not be as solid as previously believed. [...]