Mortgage Market in Review from Monte Hill week of 4/23/2007
Mortgage Market in Review
Week of April 23, 2007 Volume 14, Issue
Market Comment
Mortgage bond prices rose last week pushing interest rates lower. Bond friendly consumer price index data early in the week helped alleviate some of the recent inflationary fears. However, the Philadelphia Fed report the latter portion of the week showed some inflation pressures in that region and erased some of the earlier improvements. For the week, interest rates on government and conventional loans fell by about 1/4 of a discount point.
The employment cost index data Friday will be the most important event this week. Consumer confidence, durable goods orders, new home sales, Fed “Beige Book”, gross domestic product, and consumer sentiment data will also be important.
Looking Ahead |
Economic Indicator | Release Date and Time | Consensus Estimate | Analysis |
Consumer Confidence | Tuesday, April 24, 10:00 am, et | 105.0 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
Existing Home Sales | Tuesday, April 24, 10:00 am, et | Down 2.8% | Low importance. An indication of mortgage credit demand. A significant decrease may lead to lower rates. |
Durable Goods Orders | Wednesday, April 25, 8:30 am, et | Up 2.5% | Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates. |
New Home Sales | Wednesday, April 25, 10:00 am, et | Up 4.3% | Important. An indication of economic strength and credit demand. Weakness may lead to lower rates. |
Fed “Beige Book” | Wednesday, April 25, 2:00 pm, et | None | Important. This Fed report details current economic conditions across the US. Signs of weakness may lead to lower rates. |
Q1 Advance GDP | Friday, April 27, 8:30 am, et | Up 2.0% | Very important. The aggregate measure of US economic production. Weakness may lead to lower rates. |
Q1 Employment Cost Index | Friday, April 27, 8:30 am, et | Up 0.9% | Very important. A measure of wage inflation in the fourth quarter. Weakness may lead to lower rates. |
Michigan Sentiment | Friday, April 27, 10:00 am, et | 85.3 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
Employment Cost Index
The employment cost index is a quarterly report issued by the Department of Labor. The report measures the growth of wages, salaries, and benefits costs over a certain period of time. Though ECI figures are usually weeks old, the data remains the best indicator of employment price pressures considering it factors employees’ total compensation.
If wage pressures become evident, higher expectations of inflation also tend to arise. However, increasing compensation does not necessarily lead to increased inflationary pressures. Oftentimes, increased productivity enables employers to increase compensation without increasing the costs of their goods or services. It is important to note that no single economic indicator can consistently predict the future of the economy. However, the employment cost index is a closely watched release. Most of the recent Fed releases and speeches indicate inflation is a concern and market participants remain cautious. Now is a good time to take advantage of mortgage interest rates at their current levels to avoid exposure to future market volatility.
Monte J. Hill
John Adams Mortgage
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