Mortgage Market Overview

About a dozen different loan officers that I don’t know send me this “stock” email every Monday Morning. I’ll be sharing it with on Mondays from now on. I can’t give credit for it to all of them, but I do thank them. The copywrite is from Mortage Market Guide LLC.

The Last Week in Review

“VERY NICE. IT’S A LITTLE GREASY…BUT VERY NICE. CRUMBLE SOME CRACKERS INTO IT SHELL, THAT WILL HELP TO ABSORB THE GREASE…” Peter Falk’s line from the 1979 classic movie “The In-Laws” is good advice about soup…but doesn’t help us much when it comes to absorbing the high price of oil, a greasy topic that continues to permeate financial headlines.

And last week was no exception, with oil prices continuing to march ever higher, despite an announcement early last week by OPEC member Saudi Arabia that they will increase oil production in the near future. They are concerned that the high price of oil will lead to lower demand and a turn toward alternative energy sources. And Friday’s news didn’t help, with a strike at a Chevron plant in war-torn Nigeria, Africa’s largest oil producing nation. Additionally, Israel conducted a military operation for preparedness in case of a potential strike against Iran’s nuclear plants – which all served to push oil prices higher still. High oil prices are inflationary – so if the march higher in oil prices continues, both the Stock and Bond markets will suffer…and even crumbled crackers won’t help sop up the mess.

But Bonds did manage to find some improvement last week, helping home loan rates get better by about .125%. Negative economic news, including soft housing numbers, weakness from the manufacturing sector and more write-downs announced by financial giant Citigroup all played a hand – causing money to flow out of Stocks and over into Bonds, which helped prices improve.

 

Forecast for the week:

The coming week is chock full of economic reports that will likely have a big influence on the financial markets. We start off on Tuesday with a report on Consumer Confidence, and also the beginning of Fed meetings which will culminate in a Rate Decision and Policy Statement on Wednesday afternoon at 2:15pm ET. It is widely believed that the Fed will keep the Fed Funds Rate at 2%…but what will be most interesting is the wording of their carefully crafted Policy Statement. If it gives hints of their intent to hike rates in the near future to help fight inflation, it could actually be good news for Bonds and home loan rates.

A look at sales numbers in the new and existing housing markets will come Wednesday and Thursday, and Friday will wrap up the week with a bang as the Fed’s favorite gauge of inflation, the Core PCE (Personal Consumption Expenditure) data will be released. Since this will be following the Fed’s announcement on Wednesday – will the Fed look smart if they’ve held rates steady, or perhaps come under criticism if the inflation numbers are super-heated? Could be a greasy few days for the Fed, so stay tuned.

Remember that when Bond pricing moves higher, home loan rates move lower – and then take a look at the chart below. You can see how in recent days, Bonds have moved higher, but are now battling an overhead “ceiling” of technical resistance. If Bonds and home loan rates are to improve in the near future, it will take some very Bond-friendly news to help crash through the ceiling that has stopped progress in its tracks for the time being.

 

Japanese Candlestick Chart