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Mortgage Market in Review – March 31, 2014

Market Comment

Mortgage bond prices finished the week higher, which pushed rates lower.  The market was positive throughout most of the week, which was a nice rebound from the prior week’s rate spikes associated with the Fed meeting.  The data was mixed but that kept rates in check.  New home sales printed at 440K versus the expected 445K.  Consumer confidence printed at 82.3 versus the expected 78.1 mark.  The US economy expanded at a 2.6% rate in Q4 2013.  Consumer spending showed recovery, which is great since 2/3’s of economic activity comes from the consumer.  Mortgage interest rates finished the week better by approximately 3/8 of a discount point.

LOOKING AHEAD

Economic
Indicator

Release
Date & Time

Consensus
Estimate


Analysis

ISM Index

Tuesday, April 1,
10:00 am, et

53.3

Important.  A measure of manufacturer sentiment.  Weakness may lead to lower mortgage rates.

Construction Spending

Tuesday, April 1,
10:00 am, et

Up 0.3%

Low importance.  An indication of economic strength.  Significant weakness may lead to lower rates.

ADP Employment

Wednesday, April 2,
8:30 am, et

142k

Important.  An indication of employment.  Weakness may bring lower rates.

Factory Orders

Wednesday, April 2,
10:00 am, et

Up 0.2%

Important.  A measure of manufacturing sector strength.  Weakness may lead to lower rates.

Weekly Jobless Claims

Thursday, April 3,
8:30 am, et

309k

Important.  An indication of employment.   Higher claims may result in lower rates.

Trade Data

Thursday, April 3,
8:30 am, et

$38.9b deficit

Important.  Affects the value of the dollar.  A falling deficit may strengthen the dollar and lead to lower rates.

Employment

Friday, April 4,
8:30 am, et

6.6%,
Payrolls +185k

Very important.  An increase in unemployment or weakness in payrolls may bring 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).  The most recent report released March 25 indicated “U.S. house prices rose in January, with an increase of 0.5 percent on a seasonally adjusted basis from the previous month.  The seasonally adjusted purchase-only index for the U.S. has shown increases for 23 of the last 24 months, beginning with February 2012. The November 2013 HPI was the exception, with a decrease of 0.1 percent. The previously reported 0.8 percent increase in December was revised downward to reflect a 0.7 percent increase.

The FHFA HPI is calculated using home sales price information from mortgages either sold to or guaranteed by Fannie Mae and Freddie Mac. From January 2013 to January 2014, house prices were up 7.4 percent. The U.S. index is 8.0 percent below its April 2007 peak and is roughly the same as the May 2005 index level.”

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