Straight Stats
Mortgage interest rates improved slightly again this past week on mixed economic data. Economic data weaker than expected and supporting lower interest rates included weekly jobless claims and the Philadelphia Fed Business Index. Weekly jobless claims were expected to fall by 9k but instead increased by 12k. The August Philadelphia Fed Business Index was expected at +7.5 but actually came in at negative 7.7. Any reading below zero indicates contraction. Also of note, July Housing Starts increased but not as much as expected. July Building Permits fell 3.1% on expectations that they would fall by 2.3%. On a positive note July Industrial Production and Capacity Utilization were both better than expected. The July Producer Price Index (PPI) was in line with expectations. Core PPI, excluding the food and energy components, was up 0.3% on expectations that it would be up 0.1%.
Commentary
While the Fed and the administration insist that recovery is moving forward, the pattern of in-bound data produces the same, queasy sensation as their denial in the fall of 2007 and the summer of 2008. New unemployment insurance claims hit a one-year high, 500,000 last week — no dramatic spike, just steady deterioration. The Philadelphia Fed index yesterday stunned the remaining optimists: expected to rise from a weak 5.1 in June, it fell to negative 7.7, weakest in new-order and employment components. The definitive 10-year T-note broke last weekend from the 2.70s to 2.59%, still there, but mortgages are under upward pressure from refinance volume doubled since April, and the Fed no longer buying MBS, just Treasurys. Purchase apps are dead flat.
Gale Boonstra, CPA, MBA, is a Senior Mortgage Consultant at Premier Lending Group in Boulder. Feel free to contact her at 303.302.3932 or gboonstra@pmglending.com
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