Tag Archives: Economic data

Retail Sales Strongest Rate Since February:

Posted by Michael M on

consumer spending NL

Headline Retail Sales for September increased at a rate of 1.1% which more than doubled market forecasts of 0.5%. The Core Retail Sales (this excludes autos) also increased more than expected.  It came in at 0.6% which was three times better than the market forecasts of 0.2%.

This is very important for the housing market because housing demand is very closely tied to consumer confidence. This brings up a very interesting point. Various consumer sentiment and consumer confidence reports have shown a recent dip in their readings. So, consumers are telling the survey takers that they feel less positive about the economy and that they are less willing to spend money. But those reports are based upon surveys.

Retail Sales are based upon real and actual sales. And clearly, consumers are spending more which means their economic outlook is positive and that is always a positive for the housing market.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -75 basis points from last Friday to the prior Friday which moved mortgage rates upward and landed mortgage rates at their highest levels in three weeks.

This was in reaction to a slew of much better than expected U.S. economic data. One of the main reasons that mortgage rates are so low (we hit our historical low on 09/22/11) is due to concern over a perceived weak economic recovery. So, when the market sees data that is better than expected (and even shows economic growth), MBS sell off which causes mortgage rates to rise. We received much better than expected Retail Sales.  MBS also pulled back (higher rates) as the European Union appeared to have some less-negative news. This is important because their is certainly a “flight to safety” premium in all bonds due the concerns over the Eurozone and that has been a major factor in pushing mortgage rates lower. So, the less-negative news hurt mortgage rates.

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Employment Picture Improving And Pressured MBS

Posted by Michael M on

United States mean duration of unemployment 19...

While unemployment levels will continue to be a major concern and a drag on our economy, several reports showed some improvement last week. The headline unemployment rate remained unchanged at 9.1%, however economists are focusing on the improvement in the non-farm payroll data.

“This is the single biggest factor in housing. Regardless of interest rates – people simply don’t purchase homes when they are unemployed or are concerned about their employment picture. This is why the following data is welcome news for the housing industry.”

The headline unemployment rate remained unchanged at 9.1%, however economists are focusing on the improvement in the non-farm payroll data.

Non-farm Payrolls jumped up to 103K in September, from the revised previous month’s result of 57K, the U.S. Department of Labor reported. The results considerably exceeded forecasts of 73K growth. The change in total non-farm Payroll employment for July was also revised upward from 85K to 127K.

Average Hourly Earnings increased to 0.2% in September, following a 0.2% drop in August. On an annual basis Average Hourly Earnings remained flat at 1.9% for the second consecutive month in September.

Average Weekly Hours increased to 34.3 in September from 34.2 in August, despite forecasts of remaining at the same level.

In a separate report, the ADP Private Payroll data which measures U.S. non-farm private business sector hirings increased by 91K in September, after rising 89K in August. This was higher than market forecasts of only a 75K increase.

What Happened to Rates Last Week:

Mortgage backed securities (MBS) lost -130 basis points from last Friday to the prior Friday which moved mortgage rates upward. This was in reaction to a slew of much better than expected U.S. economic data.

“One of the main reasons that mortgage rates are so low (we hit our historical low on 09/22/11) is due to concern over a perceived weak economic recovery. So, when the market sees data that is better than expected (and even shows economic growth), MBS sell off which causes mortgage rates to rise.”

We received much better than expected news out of both the manufacturing and servicing sectors with strong ISM data. The improvement in the non-farm and private payroll data also pressured MBS.

What to Watch Out For This Week:

The following are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises:

Date Economic Event
9-Oct Columbus Day
11-Oct IBD/TIPP Economic Optimism (MoM)
11-Oct FOMC Minutes
12-Oct MBA Mortgage Applications
13-Oct Continuing Jobless Claims
13-Oct Initial Jobless Claims
13-Oct Trade Balance
13-Oct EIA Crude Oil Stocks change
13-Oct Monthly Budget Statement
14-Oct Export Price Index (MoM)
14-Oct Import Price Index (MoM)
14-Oct Import Price Index (YoY)
14-Oct Retail Sales (MoM)
14-Oct Retail Sales ex Autos (MoM)
14-Oct Reuters/MI Consumer Sentiment
14-Oct Business Inventories

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities that are the only thing government and conventional mortgage rates are based upon.

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