February 16th, 2024 3:11 PM by T. Fanning
Hello, TGIF,
Rates jumped this week due to unfavorable inflation reports. It now appears the predicted Fed rate cut in May is now in jeopardy. Next week has just a few things scheduled that we need to be concerned about. It begins with the markets closed Monday for the President's Day holiday. It appears we only need to be focused on Wednesday and Thursday since Tuesday and Friday don't show anything relevant. Wednesday's events will take place during afternoon hours (20-year Bond auction and FOMC minutes released). Thursday brings us the week's only monthly economic release and several Fed-member speaking engagements that may draw quite a bit of attention.*
We offer Conventional, FHA, VA, USDA, Jumbo and regular construction financing. Some of our niches include: Chenoa Fund loans (100% FHA financing); Conventional, FHA and VA 1x Close Construction-Perm; 1.50% Down FHA Advantage Program; CHFA Financing; HomeStyle renovation program; and a Jumbo, 5% down program. We can also do non-traditional programs! To see a detailed list of programs, visit our website: www.homeloanmortgageco.com/mortgageprograms
Last Updated: 2/16/24
Friday's bond market has opened in negative territory following another round of unfavorable inflation news. Stocks are reacting to the same data with early losses of 120 points in the Dow and 127 points in the Nasdaq. The bond market is currently down 18/32 (4.30%), which should erase yesterday's improvement in rates, bringing them back to Wednesday's early pricing.
January's Producer Price Index (PPI) kicked-off this morning's batch of economic releases at 8:30 AM ET. It showed that inflation was stronger than expected at the producer level of the economy, following suit of Tuesday's Consumer Price Index (CPI). The overall reading rose 0.3% and the core data that excludes volatile food and energy costs spiked 0.5% when both were predicted to rise just 0.1%. There is much debate this morning whether both the CPI and PPI readings are just blips in a traditionally bumpy month or if inflation is indeed hotter than many had thought. The next couple of monthly readings will help give us that answer, but the bond market is certainly taking a cautious approach by assuming the latter. Accordingly, we are seeing noticeable selling in bonds this morning.
This morning's other early report was January's Housing Starts that revealed a sizable decline in new housing groundbreakings. The 14.8% decline in starts was much larger than forecasts, hinting at weakness in the new home portion of the housing sector. Newly issued permits also dropped more than expected, signaling future groundbreakings may be softer than thought. Starts of single-family homes that are more related to mortgage rates than multi-family home figures were lower than December by 4.8% and declined 22% year-over-year. These numbers make the report good news for mortgage rates, but unfortunately, the PPI is drawing much more attention and has a significantly stronger impact on the markets than this housing report.
The week's final piece of data came from the University of Michigan, who announced their preliminary Index of Consumer Sentiment for February stood at 79.6. This was a bit higher than January's 79.0, but wasn't far from expectations. Forecasts had the index at 79.3. The increase means more surveyed consumers felt better about their own financial situations than did last month. Since stronger confidence usually translates into more consumer spending, the increase is technically bad news for rates. However, it was a small variance in a moderately important report. The PPI is the driving force behind this morning's bond selling and upward move in rates.
Next week has just a few things scheduled that we need to be concerned about. It begins with the markets closed Monday for the President's Day holiday. It appears we only need to be focused on Wednesday and Thursday since Tuesday and Friday don't show anything relevant. Wednesday's events will take place during afternoon hours (20-year Bond auction and FOMC minutes released). Thursday brings us the week's only monthly economic release and several Fed-member speaking engagements that may draw quite a bit of attention. Look for details on these activities in Sunday evening's weekly preview.
If I were considering financing/refinancing a home, I would....
Lock if my closing were taking place within 7 days... Lock if my closing were taking place between 8 and 20 days... Float if my closing were taking place between 21 and 60 days... Float if my closing were taking place over 60 days from now...
This is only my opinion of what I would do if I was financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.*
*https://www.homeloanmortgageco.com/DailyRateLockAdvisory
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