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Mortgage Market in Review – April 20, 2015

Market Comment

Mortgage bond prices finished the week higher which pushed mortgage interest rates lower. Rates were positive the first portion of the week. Retail sales rose 0.9% versus the expected 1% increase which was rate friendly. The producer price index rose 0.2% as expected. The core, which excludes volatile food and energy, rose 0.2% versus the expected 0.1% increase. Rates worsened mid week amid mixed data. The Philadelphia Fed business conditions index was 7.5 versus the expected 6.0. Consumer Sentiment was 95.9 versus the expected 94. Weekly jobless claims were 294K versus the expected 280K. Housing starts were 926K versus the expected 1.04M. Mortgage interest rates finished the week better by approximately 1/4 of a discount point despite the volatility.

LOOKING AHEAD

Economic
Indicator
Release
Date & Time
Consensus
Estimate

Analysis
FHFA House Price Index Wednesday, April 22,
10:00 am, et
Up 0.8% Moderately Important. A measure of single family house prices. Weakness may lead to lower rates.
Existing Home Sales Wednesday, April 22,
10:00 am, et
4.83M Low importance. An indication of mortgage credit demand. Significant weakness may lead to lower rates.
Weekly Jobless Claims Thursday, April 23,
8:30 am, et
287K Important. An indication of employment. Higher claims may result in lower rates.
New Home Sales Thursday, April 23,
10:00 am, et
557K Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.
5-year Treasury TIPS Auction Thursday, April 23,
1:15 pm, et
None Important. TIPS will be auctioned. Strong demand may lead to lower mortgage rates.
Durable Goods Orders Friday, April 24,
8:30 am, et
Down 0.6% Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates.

House Price Index

The Federal Housing Finance Agency (FHFA) was created on July 30, 2008, when the President signed into law the Housing and Economic Recovery Act of 2008. The Act gave FHFA the authorities necessary to oversee vital components of our country’s secondary mortgage markets – Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. FHFA’s mission is to provide effective supervision, regulation and housing mission oversight of Fannie Mae, Freddie Mac and the Federal Home Loan Banks to promote their safety and soundness, support housing finance and affordable housing, and support a stable and liquid mortgage market.

FHFA issues a monthly report on house prices called the House Price Index (HPI) that looks back 2 months in time. The most recent report released March 24 indicated “U.S. house prices rose in January, with an increase of 0.3 percent on a seasonally adjusted basis from the previous month.”

“The FHFA HPI is calculated using home sales price information from mortgages sold to or guaranteed by Fannie Mae and Freddie Mac. From January 2014 to January 2015, house prices were up 5.1 percent. The U.S. index is 3.5 percent below its March 2007 peak and is roughly the same as the December 2005 index level. For the nine census divisions, seasonally adjusted monthly price changes from December 2014 to January 2015 ranged from -0.4 percent in the Middle Atlantic and South Atlantic divisions to +2.3 percent in the East South Central division. The 12-month changes were all positive ranging from +1.7 percent in the Middle Atlantic division to +8.2 percent in the Pacific division.”

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