Mortgage Market Review - 3/22/10

Good morning. I hope you enjoyed the beautiful weather on Saturday and were able to get out and enjoy it. As a reminder, if you are still thinking about purchasing a home, don’t forget that the end of the first time home buyer tax credit is in sight, and I have heard nothing about any extensions. Borrowers need to be in contract by April 30 and close by June 30. The tax credit is available for everyone who is purchasing a home (up to $8K for 1st time buyers and $6,500.00 for current homeowners).

One of the most popular videos on You Tube (with over 2 million hits!) has been the “Embrace Life” video. This started out as an advertisement for seat belts and has turned into an online sensation due to the beauty of the way it states itself. It’s worth a look if you haven’t seen it. It can be found at http://www.youtube.com/watch?v=h-8PBx7isoM. I hope you have a great week. Please let me know if you have any questions and thanks for taking the time to look this over. I hope you find it informative and useful.

Fred

This Morning…Monday, March 22, 2010:
There is no relevant economic data being posted today and the interest rate market is moving with the equities market. This morning, the bond market has opened in positive territory as stocks react negatively to the healthcare bill and concerns about Greece again. The health care bill was passed late yesterday which came as no surprise to the market; the Dems had the votes and used them to pass the most encompassing health bill ever. It was all Dems, with no Republican voting for it. This morning the markets are struggling to figure out which stocks will benefit and which will take a hit. The stock markets have opened slightly in negative ground with the Dow currently down 14 points and the Nasdaq down 3 points. The bond market is up slightly and currently mortgage rates are unchanged from Friday’s close.

Last Week:
Mortgage bond prices rose last week helping mortgage interest rates improve slightly. We started the week on a positive note with rates falling amid tame inflation readings. The producer price index fell 0.6% and the core rose 0.1%. The headline figure was the lowest since July 2009. Weekly jobless claims showed the employment situation remained poor. Unfortunately we saw the market fall a bit pushing rates higher Thursday afternoon following the announcement of the size of the upcoming Treasury auctions and amid fear of future rate hikes.

This Week:
This week we will see the Treasury auctioning off another $118 billion, with the usual questions about demand from foreign investors. Certainly there is little fear of inflation eating away fixed-income earnings. There is no news today, but tomorrow we have Existing Home Sales (expected to be down just under1%) and Wednesday New Home Sales (expected to be up 1.5%). Durable Goods is also scheduled for Wednesday. Thursday is Initial Jobless Claims along with Personal Income and Consumption, and on Friday we have a report on first quarter Gross Domestic Product (GDP) along with Consumer Sentiment from the University of Michigan.

EconomicIndicator
Existing Home Sales
Tuesday, March 23,10:00 am, et
Down 0.9%
Low importance. An indication of mortgage credit demand. A significant decrease may lead to lower rates.
2-year Treasury Note Auction
Tuesday, March 23,1:15 pm, et
None
Important. $44 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
Durable Goods Orders
Wednesday, March 24,8:30 am, et
Up 0.5%
Important. An indication of the demand for "big ticket" items. Weakness may lead to lower rates.
New Home Sales
Wednesday, March 24, 10:00 am, et
Up 1.5%
Important. An indication of economic strength and credit demand. Weakness may lead to lower rates.
5-year Treasury Note Auction
Wednesday, March 24, 1:15 pm, et
None
Important. $42 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
7-year Treasury Note Auction
Thursday, March 25,1:15 pm, et
None
Important. $32 billion of notes will be auctioned. Strong demand may lead to lower mortgage rates.
Q4 GDP third estimate
Friday, March 26,8:30 am, et
Up 5.8%
Important. The aggregate measure of US economic production. Weakness may lead to lower rates.
U of Michigan Consumer Sentiment
Friday, March 26,10:00 am, et
71
Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates.

Market Forecast:
Overall, it is difficult to label one particular day as the most important of the week. The single most important report will likely be the Durable Goods Orders, but none of the week’s data has the potential to be a major market mover. Supply concerns will continue to weigh heavily upon the bond market with the continued record Treasury auctions. If foreign demand falters mortgage interest rates could be pressured higher. If the stock markets move lower, we should see gains in bonds and improvements in mortgage rates. But, if stocks move higher, pressure in bonds is possible, leading to higher mortgage pricing. I suspect that this week will be a little calmer for mortgage rates than the past couple weeks have been.As I mentioned, the durable goods and gross domestic product (GDP) data will be the most important releases this week and is one the most important reports during any given quarter. GDP is a measure of US economic output and spending. The report is significant in that it provides investors, analysts, traders, and economists with a comprehensive report of the direction of the economy. In addition, it also influences the decisions of Federal Reserve policy makers, Congressional budget employees, and corporate financial planners.

Some Humor:
A man walks into a bar, notices a very large jar on the counter, and sees that it's filled to the rim with $10 bills. He guesses there must be at least ten thousand dollars in it. He approaches the bartender and asks, "What's with the money in the jar?"
"Well..., you pay $10, and if you pass three tests, you get all the money in the jar and the keys to a brand new Lexus."
The man certainly isn't going to pass this up, so he asks, "What are the three tests?"
"You gotta pay first," says the bartender, "those are the rules."
So, after thinking it over a while, the man gives the bartender $10 which he stuffs into the jar.
"Okay," says the bartender, "here's what you need to do. First - You have to drink a whole quart of tequila, in 60 seconds or less, and you can't make a face while doing it.
"Second - There's a pit bull chained in the back with a bad tooth. You have to remove that tooth with your bare hands.
"Third - There's a 90-year old lady upstairs who's never had sex. You have to take care of that problem."
The man is stunned! "I know I paid my $10 -- but I'm not an idiot! I won't do it! You'd have to be nuts to drink a quart of tequila and then do all those other things!"
"Your call," says the bartender, "but, your money stays where it is."
As time goes on, the man has a few more drinks and finally says, "Where's the damn tequila?!"He grabs the bottle with both hands and drinks it as fast as he can. Tears stream down both cheeks -- but he doesn't make a face -- and he drinks it in 58 seconds!
Next, he staggers out the back door where he sees the pit bull chained to a pole. Soon, the people inside the bar hear loud growling, screaming, and sounds of a terrible fight -- then nothing but silence!
Just when they think that the man surely must be dead, he staggers back into the bar. His clothes are ripped to shreds and he's bleeding from bites and gashes all over his body. He drunkenly says, "Now..., where's that old woman with the bad tooth?"

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