This Week's Mortgage Forecast


LAST WEEK IN REVIEW

The important thing in this world is not so much where we stand, as in what direction we are moving." Oliver Wendell Holmes. With several disappointing economic reports of late, the question remains whether our economy is moving in the right direction.

There was a disappointing read on January's retail sales, as they fell by 0.4 percent versus the 0.0 percent expected. This was the second straight monthly decline and retailers cited the harsh January weather as the reason.

There was also some disappointing news in the labor market, as weekly Initial Jobless Claims rose by 8,000 in the latest week to 339,000. In addition, the four-week average, which irons out seasonal abnormalities, also increased. The labor market has been muddling along for the past two months, especially given December's and January's weaker than expected job creations.

There was some good news on the housing front, as RealtyTac reported that January marked the fortieth consecutive month where U.S. foreclosure activity declined on an annual basis. Filings are down 18 percent from January 2013 to January 2014, but the annual decline of 18 percent was the smallest annual decline since September 2012.

What does this mean for home loan rates? Remember that the Fed is now purchasing $35 billion in Treasuries and $30 billion in Mortgage Bonds (the type of Bonds on which home loan rates are based) to help stimulate the economy and housing market. This figure is down from the $85 billion in Bonds and Treasuries the Fed had been purchasing last year. If economic reports continue to be weak, the Fed will have to decide whether it will continue to taper its Bond purchases. This will surely have an impact on the markets and home loan rates in the weeks and months to come.

The bottom line is that now remains a great time to consider a home purchase or refinance, as home loan rates remain attractive compared to historical levels.


FORECAST FOR THE WEEK

The markets are closed Monday for the Presidents Day holiday. The rest of the week will be busy, with key housing, inflation, and manufacturing news.

  • Manufacturing data from the Empire State Index on Tuesday and the Philadelphia Fed Index on Thursday will give investors a look at two of the major regions in the nation.
  • Housing dominates the week with the National Association of Home Builders Housing Market Index on Tuesday, Housing Starts and Building Permits on Wednesday, and Existing Home Sales on Friday.
  • We'll get a read on inflation with the wholesale-measuring Producer Price Index on Wednesday, followed by the Consumer Price Index on Thursday.
  • Also on Thursday, Weekly Initial Jobless Claims will be reported as usual.

In addition, the minutes from the January 28-29 Federal Open Market Committee meeting will be released on Wednesday, and this could provide some volatility this week. Investors will be looking for additional information about tapering when the minutes are released. Will the minutes hint toward ending the Fed's Bond purchase program sooner rather than later?

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond on which home loan rates are based.


When you see these Bond prices moving higher, it means home loan rates are improving — and when they are moving lower, home loan rates are getting worse.


Economic Calendar for the Week of Feb 17 - Feb 21
 

Date
ET
Economic Report
For
Estimate
Actual
Prior
Impact
Tue. February 18
08:30
Empire State Index
Feb
7.5
 
12.5
HIGH
Tue. February 18
10:00
Housing Market Index
Feb
56
 
56
Moderate
Wed. February 19
08:00
Core Producer Price Index (PPI)
Jan
0.1%
 
0.3%
Low
Wed. February 19
08:30
Housing Starts
Jan
964K
 
999K
Moderate
Wed. February 19
08:30
Building Permits
Jan
980K
 
986K
Moderate
Wed. February 19
08:30
Producer Price Index (PPI)
Jan
0.2%
 
0.4%
Moderate
Wed. February 19
03:00
FOMC Minutes
 
 
 
 
Low
Thu. February 20 
08:30
Jobless Claims 
2/15
335K
 
339K
Moderate
Thu. February 20 
08:30
Consumer Price Index (CPI)
Jan
0.1%
 
0.3%
HIGH
Thu. February 20 
08:30
Core Consumer Price Index (CPI)
Jan
0.1%
 
0.1%
HIGH
Thu. February 20 
10:00
Philadelphia Fed Index
Feb
7.4
 
9.4
HIGH
Fri. February 21
10:00
Existing Home Sales
Jan
4.75M
 
4.87M
Moderate
 

If there is any questions you may have in regards to financing your new home purchase or refinancing, please give me a call at 314-744-7806, or visit me at my website at www.CallTheMoneyMan.com.

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