Increased optimism that a Greek bailout package will be approved on Monday caused investors to shift to riskier assets, which was negative for mortgage rates. Mixed US growth and inflation data had little net impact. Mortgage rates ended the week a little higher.
The most significant influence on mortgage rates this week was Friday’s Employment report, which was much stronger than expected. Events in Europe have had less impact on US markets in recent weeks. While mortgage rates moved lower early in the week, they ended the week a little higher.
An improving US economic outlook was negative for mortgage rates this week. Reduced concerns about Europe also caused a partial reversal in the flight to safety trade. As a result, mortgage rates ended the week higher.
Early in the month, the December Employment report showed a larger than expected increase of 200K jobs, and the Unemployment Rate continued to move lower. This week, Weekly Jobless Claims fell to the lowest level since April 2008. The labor market is one of the most important factors in the health of the economy, and many investors now view the outlook as brighter than it has been since the financial crisis began. If this is the case, it will be great news for the economy, and job gains will increase the willingness and the ability of people to purchase homes.
Increased concerns about Europe helped mortgage rates improve this week, although the impact of the recently passed extension to the payroll tax reduction is beginning to push up mortgage rates for certain loans (discussed below).
The news from Europe was mostly negative this week. Economic growth in Germany was slower than expected. Negotiations on restructuring Greek debt did not progress as planned, increasing the risk of default. S&P is downgrading the debt of several European countries, including France. Finally, the European Central Bank (ECB) provided no relief, as it gave no indication that it would increase the level of aid available to troubled countries. As a result, investors shifted funds to relatively safer investments, including US mortgage-backed securities (MBS), which helped mortgage rates move lower.
During the first week of the new year, mortgage rates continued to be influenced by the same factors as in 2011. Stronger than expected US economic data roughly offset continued concerns about Europe, and mortgage rates ended the week nearly unchanged.
Friday’s Employment report provided further support that the US economy is gaining strength to begin the new year. Against a consensus forecast of 150K, the economy added 200K jobs in December. The Unemployment Rate unexpectedly fell to 8.5%, the lowest level since February 2009, from 8.7% in November. The decline was partly due to the increase in jobs and partly due to people dropping out of the labor force. Average Hourly Earnings, a proxy for wage growth, increased 2.1% from one year ago. This was an encouraging report in nearly every area.
Continue reading "Weekly Mortgage Mark"
Many investors wanted to avoid risk during the final week of the year, which helped relatively safer assets such as US mortgage-backed securities (MBS). As a result, mortgage rates fell a little to end near the lowest levels of the year.
While economic growth was well below average for the first three quarters of 2011, a pickup during the fourth quarter bodes well for stronger housing market activity next year. Nearly all of the economic data released during the fourth quarter pointed to improvement. The labor market picked up, consumer confidence rose, and home sales activity increased. This week, in the final piece of housing data for 2011, Pending Home Sales rose 7% from the prior month, to the highest level of the year. Continue reading "Mortgage Market Reca"
