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Mortgage Market in Review – December 19, 2016

Market Comment

Mortgage bond prices finished the week sharply lower which caused rates to spike higher. Rates increased Monday morning tied to reports of rising oil prices. Producer prices rose 0.4% versus the expected 0.1% increase. The core, which excludes volatile food and energy prices, rose 0.4% versus the expected 0.2% increase. The Fed raised rates as expected but their statement about future rate hikes sent mortgage interest rates skyrocketing Wednesday afternoon. The Fed indicated they see three rate hikes in 2017 while the market expected two. Consumer prices were tame and weekly jobless claims were about as expected. The Philadelphia Fed report shocked the markets Thursday with a sharply higher reading (21.5 vs. 9) and added to the selling pressure. Mortgage interest rates finished the week higher by over 1 ½ discount points.
LOOKING AHEAD

Economic Indicator Release Date & Time Consensus Estimate Analysis
Q3 Revised GDP Thursday, Dec. 22, 8:30 am, et Up 3.1% Very important. The aggregate measure of US economic production. Weakness may lead to lower rates.
Durable Goods Orders Thursday, Dec. 22, 8:30 am, et Up 2.2% Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates.
Weekly Jobless Claims Thursday, Dec. 22, 8:30 am, et 252K Important. An indication of employment. Higher claims may result in lower rates.
FHFA House Price Index Thursday, Dec. 22, 10:00 am, et Up 0.8% Moderately Important. A measure of single family house prices. Weakness may lead to lower rates.
Leading Economic Indicators Thursday, Dec. 22, 10:00 am, et Up 0.2% Important. An indication of future economic activity. A smaller increase may lead to lower rates.
Personal Income and Outlays Thursday, Dec. 22, 8:30 am, et Up 0.6%, Up 0.4% Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates.
PCE Core Inflation Thursday, Dec. 22, 8:30 am, et Up 0.1% Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve.
U of Michigan Consumer Sentiment Friday, Dec. 23, 10:00 am, et 98.2 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.
New Home Sales Friday, Dec. 23, 10:00 am, et 565K Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.

Income and Outlays

The personal income and outlays release is a monthly report issued by the Bureau of Economic Analysis (BEA). The data is important because it is thought to provide a solid indication of future consumer demand. The personal income component is primarily a measure of wages and salaries. The outlays component is primarily a measure of spending on goods and services. Together the figures provide analysts valuable insight into consumer economic standing and consumption. It is important to note that no single economic indicator can consistently predict the future of the economy. However, the personal income and outlays report is a closely watched release. The consumer remains a vital component of the US economy. The release this week has the potential to move the financial markets.

 

Copyright 2016. 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.