San Jose Weekly Mortgage Market Commentary 10/18/2009

The week that was:

By the end of the week mortgage rates and treasury rates were basically unchanged. Now looking for mortgage rates to hold between 5.00% and 5.37% for the near term, that said, the technicals are now slightly bearish.

Estimates for Loan Volume for 2010 & 2011 – The MBA is out with their revised estimates for loan volume next year and the next; the estimates have been revised lower. In 2010 the new estimate is $1.556T frm $1.62T previously thought; in 2011 to $1.482T frm $1.608T.

Economy News – Weekly unemployment claims were expected to be unchanged, but fell 10K to 514K while continuing claims fell 75K on the week. Core Consumer Price Index (ex food and energy components), a measure of inflation was +0.2% against estimates of +0.1%.

Dow Jones over 10,000 – The DJIA did it, traded over 10K last week. A benchmark for the headlines but other than that not much more than a number. It is a positive psychological level that we all pay attention to, the question in the equity markets now is, will it add to buying and cause more money to be invested? Or is it the buy the rumor, sell the fact syndrome that often occurs after markets have discounted the good news.

Minutes of Fed Meeting – The Fed minutes showed the Fed has increased its optimistic outlook from the previous meeting. Housing markets are recovering, global economies are improving, and consumer spending is stabilizing according to the minutes. Although the outlook has improved, members were still concerned that the recovery would be slow and unemployment high for most all of 2010. The FOMC doesn’t expect unemployment to drop below 8.0% before the middle of 2011. Unemployment will remain high; 9.5% by mid-2010 but over 10% between then and now. The inflation rate will remain low for now. The minutes also called attention to bank lending being very restrictive and taking many out of the market to borrow.

The week that will be:

The week is marked with data on the housing sector with Sept housing starts and building permits, the FHFA housing price index and Sept existing home sales. Of course weekly jobless claims on Thursday. Two optimistic possibilities for the housing markets that are swimming around; the Obama administration is seriously considering extending the first time home buyers tax credit, and in the FOMC minutes of the 9/23 meeting there were a few FOMC members talking about the possibilities of the Fed increasing its purchases of MBSs after the $1.25T buy ends at the end of Q1 2010. This week the rate markets are likely to improve fractionally, but nothing significant.

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