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Mortgage Market in Review – September 22, 2014

Market Comment Mortgage bond prices finished the week near unchanged despite some up and down trading. Prices pushed higher Monday morning which helped rates improve in response to weaker data. Industrial production fell 0.1% versus the expected 0.2% increase. Capacity use came in @ 78.8% versus the expected 79.3% mark. The gains were short-lived despite tame inflation readings. The consumer and producer price indices were both lower than expected. The Fed meeting Wednesday had traders on edge and mortgage bonds were negative surrounding the meeting. There were no surprises from the Fed which kept rates in check and signaled another reduction of MBS purchases in October. MBS prices rebounded a bit Friday morning and mortgage interest rates finished the week near unchanged. LOOKING AHEAD

Economic Indicator Release Date & Time Consensus Estimate Analysis
Existing Home Sales Monday, Sept. 22, 10:00 am, et 5.08m Low importance. An indication of mortgage credit demand. Significant weakness may lead to lower rates.
2-year Treasury Note Auction Tuesday, Sept. 23, 1:15 pm, et None Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
New Home Sales Wednesday, Sept. 24, 10:00 am, et 413k Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.
5-year Treasury Note Auction Wednesday, Sept. 24, 1:15 pm, et None Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
Durable Goods Orders Thursday, Sept. 25, 8:30 am, et Up 1.2% Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates.
Weekly Jobless Claims Thursday, Sept. 25, 8:30 am, et 315k Important. An indication of employment. Higher claims may result in lower rates.
7-year Treasury Note Auction Thursday, Sept. 25, 1:15 pm, et None Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
Q2 GDP Third Estimate Friday, Sept. 26, 8:30 am, et Up 2.0% Important. The aggregate measure of US economic production. Weakness may lead to lower rates.
U of Michigan Consumer Sentiment Friday, Sept. 26, 10:00 am, et 83.2 Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Market Conditions There is a Chinese proverb that states, “May you live in interesting times.” It is often argued that the word interesting is meant to be a synonym for turbulent or dangerous. This phrase hits the bull’s-eye given the current state of the financial markets. Stocks reached new highs following the Fed meeting last week but the housing sector of the economy remains wobbly. Many traders are concerned about future Fed rate increases. The Fed has difficult decisions to make. Current indications point to a hike sometime in 2015 however the specific timing is everything. The last thing the Fed wants to do is stifle the economic recovery they have worked so hard to produce. The Fed continues to taper the purchase of mortgage bonds but interest rates for conforming and FHA/VA loans remain low despite some recent increases. Remember, low rates are not a given considering the uncertainty in the financial markets. A cautious approach to float/lock decisions would be wise in this environment. 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.