Newsletter-March 27th, 2017    
Provided by
Fred Olson
Fred Olson
CPC Mortgage
180 S EUCLID AVE
PASADENA, CA 91101
Phone: (626) 446-5711
Fax: (626) 446-4076
E-Mail: fredolson@cpcmortgage.com
 
 

Market Comment

Mortgage bond prices finished the week higher which pushed rates lower.  Rates started the week lower with no data releases.  The positive streak continued after tame housing data.  Existing home sales printed at 5.48M units versus the expected 5.54M.  Housing prices were unchanged from December to January according to the FHFA Housing Price Index. Overall prices have risen 5.7% in the last year, further proof that owning a home is a good idea.  Weekly jobless claims printed at 258K and continuing claims, a summation of all receiving benefits, at 2,000K. Expectations were for claims at 239K and continuing claims at 2,030K.  New home sales printed at 592K versus the expected 560K.  Mortgage interest rates finished the week better by approximately 3/8 of discount point despite some significant up and down trading.


LOOKING AHEAD

Economic
Indicator

Release
Date & Time

Consensus
Estimate


Analysis

2-year Treasury Note Auction

Monday, March 27,
1:15 pm, et

None

Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.
Consumer Confidence

Tuesday, March 28,
10:00 am, et

115

Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.
5-year Treasury Note Auction

Tuesday, March 28,
1:15 pm, et

None

Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.
7-year Treasury Note Auction

Wednesday, March 29,
1:15 pm, et

None

Important.  Notes will be auctioned.  Strong demand may lead to lower mortgage rates.
Q4 GDP Third estimate

Thursday, March 30,
8:30 am, et

Up 1.9%

Very important.  The aggregate measure of US economic production.  Weakness may lead to lower rates.
Weekly Jobless Claims

Thursday, March 30,
8:30 am, et

258K Important.  An indication of employment.   Higher claims may result in lower rates.
Personal Income and Outlays

Friday, March 31,
8:30 am, et

Up 0.3%,
Up 0.2%

Important.  A measure of consumers’ ability to spend.  Weakness may lead to lower mortgage rates.
PCE Core Inflation

Friday, March 31,
8:30 am, et

Up 0.3%

Important.  A measure of price increases for all domestic personal consumption.  Weaker figure may help rates improve.
U of Michigan Consumer Sentiment

Friday, March 31,
8:30 am, et

97.8 Important.  An indication of consumers’ willingness to spend.  Weakness may lead to lower mortgage rates.

CRE

Commercial real estate (CRE) is one asset class that has seen prices rise to the point that many fear a collapse is in the making. Banks hold nearly $2T in loans backed by CRE and the Federal Reserve is growing concerned about valuations of the underlying asset. Federal Reserve Chair Janet Yellen said, “valuations in the CRE sector appear increasingly vulnerable to negative shocks.”

 

The danger in the CRE market is the fact that it is highly leveraged, developers have little “skin in the game.” To shore up profits following the 2008 bust banks lined up to provide financing, which caused prices to rise even further. Sound familiar, banks providing easy money to high LTV borrowers? Last time that happened it did not turn out well.

 


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   MORTGAGE MARKET IN REVIEW Newsletter-March 27th, 2017