Mortgage Market in Review from Monte Hill for the week of 7/30/2007
Mortgage Market in Review
Week of July 30, 2007 Volume 14, Issue
Market Comment
Mortgage bond prices rose pushing mortgage interest rates lower last week. Significant stock weakness domestically and across the globe resulted in an influx of funds into mortgage bonds helping rates to improve. Weaker than expected durable goods orders, new homes sale, and fears that the subprime mortgage problems will ripple through the economy helped bonds rally. For the week, interest rates on government and conventional loans were better by about 3/8’s of a discount point.
The employment cost index and employment report will be the most important events this week. Income, outlays, consumer confidence, ISM Index, and factory orders data will also be important. This is the last full week of data heading into the Fed meeting August 7th.
Looking Ahead |
Economic Indicator | Release Date and Time | Consensus Estimate |
Analysis |
Personal Income and Outlays | Tuesday, July 31, 8:30 am, et | Income up 0.5%, Outlays up 0.1% | Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates. |
Q2 Employment Cost Index | Tuesday, July 31, 8:30 am, et | Up 1.0% | Very important. A measure of wage inflation. Weakness may lead to lower rates. |
Construction Spending | Tuesday, July 31, 10:00 am, et | Up 0.3% | Low importance. An indication of economic strength. Significant weakness may lead to lower rates. |
Consumer Confidence | Tuesday, July 31, 10:00 am, et | 105.0 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
ISM Index | Wednesday, Aug. 1, 10:00 am, et | 55.5 | Important. A measure of manufacturer sentiment. A large decline may lead to lower mortgage rates. |
Factory Orders | Thursday, Aug. 2, 10:00 am, et | Up 1.3% | Important. A measure of manufacturing sector strength. Weakness may lead to lower rates. |
Employment | Friday, Aug. 3, 8:30 am, et | Unemp. @ 4.5%, Payrolls +135k | Very important. An increase in unemployment or weakness in payrolls may bring lower rates. |
ISM
The Institute for Supply Management (ISM), formerly the National Association of Purchasing Management (NAPM), releases the “Report on Business” on the first working day of each month. Part of this report is the “diffusion index,” which tracks the economy’s ups and downs fairly well.
In conducting this survey, the ISM questions purchasing executives from over 250 industrial companies compiling data on production, orders, commodity prices, inventories, vendor performance, and employment. Each of the respondents is asked to rank the categories as “up” or “down.” Various weights are applied to the individual components to form the composite index.
A composite index reading of 50 can be thought of as a “swing point.” A reading above 50 implies an increase in economic activity, while a reading below 50 indicates a decline. As a rule of thumb, when the index approaches 60, investors begin to worry about an overheated economy. A slide below 40 suggests that recession is at hand.
The ISM report is difficult for economists to forecast because there is little data upon which to base an educated guess. Economists often look to regional Purchasing Managers’ reports that are released prior to the full report, in a further effort to anticipate the results of the full report.
Monte J. Hill
John Adams Mortgage
586-308-6420
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