Market Comment Mortgage bond prices finished the week higher which pushed rates slightly lower. Rates were positive throughout most of the week tied to continued downward pressure on oil prices, stock weakness, and global economic worries. Manufacturing data out of China signaled a pullback and China’s central bank pumped almost $80b into the banking system in an effort to invigorate growth. Weekly jobless claims came in at 294K versus the expected 295K mark which was relatively rate neutral. The Producer price index fell 0.2% versus the expected 0.1% decrease. The core was unchanged versus the estimated 0.1% increase. Mortgage interest rates finished the week better by approximately 3/8 to 1/2 of a discount point. LOOKING AHEAD
Housing Starts Housing starts data is a leading indicator of the state of our economy. This report, provided by the Bureau of the Census, takes into account data from both single-family homes and multi-family dwellings. Building permits are also released with the housing starts data. By knowing the number of permits issued monthly, analysts can attempt to estimate for the upcoming months. Normally, starts are 10% higher than permits since all locations are not required to have a building permit. Housing starts and permits give a warning of future economic activity. In effect, a rise in housing starts can lead to a fall in the bond market and vice versa. Consumers tend to hold off on the purchase of new homes, new cars, and other big-ticket items if they are worried about the future of the economy. Housing is an important part of our economy. Declines in housing starts can lead to economic slowdown. On the other hand, increases in housing starts can signal positives for the economy. From the opposite perspective, changes in interest rates often lead to changes in housing starts. High interest rates can cause a significant decline in home sales, which can lead to a drop in housing starts. Just the opposite happens when rates remain low. Low mortgage rates affect both home sales and housing starts. The housing market is a vital component in sustaining the economy. Many economists believe housing will continue to recover. There is still uncertainty regarding the future state of the economy and interest rates.
Copyright 2014. All Rights Reserved. Mortgage Market Information Services, Inc. www.ratelink.com The information contained herein is believed to be accurate, however no representation or warranties are written or implied. |
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