It’s that time again!….Mortgage Time

Mortgage Market News for the week of Nov. 8, 2013
Compliments of
Patrick Gardner
Mortgage Loan Officer
NMLS ID: 378888
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This week was packed with major economic reports and a Fed meeting. With investors looking for hints about when the Fed will begin to taper its bond purchases, the data caused a great deal of volatility. Because the economic news was roughly neutral overall, though, mortgage rates ended the week just slightly higher.

A shockingly strong Employment report caused a swift increase in mortgage rates on Friday. Against a consensus forecast of 120K, the economy added 204K jobs in October, and the figures from the prior two months were revised higher by 60K. The Unemployment Rate, however, rose from 7.2% to 7.3%. The increase in the Unemployment Rate was influenced by the government shutdown during the first half of October. The headline figure of 204K jobs is based on a survey which counts furloughed government workers as employed, while the Unemployment Rate is based on a different survey which counts them as unemployed. Before the data, most investors had expected that the Fed would begin to taper its bonds purchases in March or April. If the pace of job creation continues at this level, though, the Fed could begin to scale back sooner.

In similar fashion, the Gross Domestic Product (GDP) report, the broadest measure of economic growth, was much better than expected. Third quarter GDP rose to 2.8%, well above the consensus of 2.0%. The reaction in mortgage markets was somewhat limited, though, since the details did not quite indicate the same strength as the headline number. Part of the outperformance was due to an unexpectedly large increase in inventories, which means that some growth was “pulled forward” from the fourth quarter. The extra goods produced during the third quarter which caused inventories to expand will reduce production in the fourth quarter.

Core PCE inflation was just 1.2% higher than one year ago
Consumer Sentiment declined to the lowest level since Dec. 2011
The Treasury will auction $70 billion in securities next week
The European Central Bank (ECB) cut rates

Next week, the Trade Balance and Productivity will be released on Thursday. Industrial Production, Empire State, and Import Prices will come out on Friday. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday. Mortgage markets will be closed on Monday in observance of Veterans Day.

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