Last Week's Recap and This Week's Updates

Last week saw mortgage rates lose an average of .25% in rate among most lenders as MBS (Mortgage Backed Securities) lost 182 basis points in trading pricing. This increase saw us hit the second highest level of mortgage rates in 2013. The market continues to solely focused on economic reports and concerns about the Fed tapering down on QE3's purchase of MBS and Treasuries.  We had a -239 BPS sell off from our weekly highs to our weekly lows, which clearly shows you the market's pull-back in appetite for MBS.  Both the stock market and the bond market are trying to position themselves in advance of the withdrawal.

Last week was very busy with a large amount of economic data released.  Most of the data including Retail Sales, PPI and CPI were all close to market expectations and didn't really impact rates.  But we did have a much better than expected Initial Weekly Jobless Claims report and that helped to pressure MBS.  The preliminary reading for the Consumer Sentiment Index was much weaker than expected and normally would have helped rates, but the market was under too much pressure from two big factors.
            1.  Strength in Europe

            2.  Speculation that the Fed would begin to decrease their monthly bond purchases in September. 

Those two factors are likely to be the major driving force in mortgage rates this week too.

This week we have a very light week for economic releases with Existing Home Sales and Weekly Initial Jobless Claims being the most important.  The most imperatively events this week will not economic reports, but Fed events. Wednesday's FOMC minutes will be a major driving force in pricing as traders look to see how much traction tapering talk had at the last FOMC meeting. 

Thursday and Friday the market will focus on the Jackson Hole Wyoming meeting as Central Bankers and economists from around the world attend the retreat.  Traders will be focusing on any discussion on the timing of the Fed's tapering of bond purchases and who the next Fed Chair will be.

Sentiment continues to mount that the Fed will taper in September.  We will need some new commentary from the Fed's Chairmen that changes trader's minds from expecting a taper in September to December for MBS to see any improvement in pricing.

The Housing Market is trying to find balance, according to Realtor.com's National Housing Trend Report for the month of July 2013, the nation experienced a 5.24% decline in housing inventory in a year-over-year comparison; however it was an increase of 1.41% in a month-over-month comparison. While we have seen significant rebounding in the housing industry over the last year, we are now seeing that slow down as it finds balance. Out of all of the variables that make up housing market pricing, it is most likely the dramatic increase in mortgage rates that have led to the turnaround in inventory. While it is easy to take this as a negative, one must remember that lack of inventory poses its own problems, and that the best thing for sustainable business is balance.

Read more:

http://investor.move.com/2013-08-13-Realtor-com-National-Housing-Trend-Report-Shows-Dramatic-National-Year-Over-Year-Inventory-Declines-are-Easing

You can also view the updated Real Estate Report at:

http://www.newsletterproonline.com/newsletter/originationpro/?newsletter=true&nid=474&uid=10671

We are currently having another negative pricing adjustment.  Contact us today so that we can get out ahead of any future declines and be in place to capitalize on any market improvements.

www.specialtyfinancialmtg.com

- Michael Corboy