Mortgage Rates

Anthony Hood Equity Investment Capital Office: 949-891-0067 Email: tony@equityinvestmentcapital.com website: www.equityinvestmentcapital.com A better start this morning after prices declined yesterday in the treasury market, mortgage prices yesterday ended about unchanged but were down from levels at 9:30. This morning prior to economic data the 10 yr note yield down another 2 bp after declining 2 bp yesterday, the yield at 8:30 1.81% at its 20 day average. Early trading on stock index futures had the DJIA down 60 points at 8:30. Mortgage applications increased 15.2% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) for the week ending January 11, 2013. The Refinance Index increased 15% from the previous week. The seasonally adjusted Purchase Index increased 13% from one week earlier to the highest level since April 2011. The refinance share of mortgage activity remained unchanged at 82% of total applications from the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 3% of total applications. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) remained unchanged at 3.61%, with points decreasing to 0.38 from 0.41 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) increased to 3.88% from 3.78%, with points unchanged at 0.38 (including the origination fee) for 80% loans. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.39% from 3.35%, with points decreasing to 0.58 from 0.69 (including the origination fee) for 80% loans. The average contract interest rate for 15-year fixed-rate mortgages remained unchanged at 2.88%, with points decreasing to 0.27 from 0.39 (including the origination fee) for 80% loans. The average contract interest rate for 5/1 ARMs increased to 2.66% from 2.64%, with points decreasing to 0.34 from 0.37 (including the origination fee) for 80% loans. Dec CPI at 8:30 was expected 0.0% while the core expected +0.1%; both the overall and the core (ex food and energy) were as forecast. Costs rose 1.7% in 2012, down from a 3% increase in 2011. Inflation fears that continue to roil some in the markets are nowhere in sight based on the past couple of months, Nov CPI declined 0.3%. Slow economic growth will continue to keep inflation at bay. In Europe inflation is also not much of an issue; the annual core inflation rate, excluding volatile costs such as energy, alcohol and tobacco, rose to 1.5% in December from 1.4% a month earlier. At 9:15 Dec industrial production was expected up 0.2% to 0.3%, it increased 0.3%. Production increased on demand for business equipment even with Congress battling over the budget and fiscal Cliff. Nov production originally reported +1.1% was revised to +1.3%. Dec capacity utilization was better at 78.8% on forecasts of 78.5% and 78.4% in November. Analysts here and in Europe are beginning to forecast GDP growth rates for Q4; most are revising growth outlooks lower frm earlier estimates. Weaker earnings frm a couple of Wall Street firms and declining growth forecasts are pressuring the stock market early this morning both here and in Europe. The weaker stocks are helping the interest rate markets so far today; along with the debt ceiling talks there is still some safety moves into US and German 10 yr notes and bunds. Treasuries are up for a fourth day on speculation political wrangling over the U.S. debt ceiling will curb economic growth, fueling demand for the safety of debt. At 9:30 the DJIA opened -57, NASDAQ unchanged, S&P -3. 30 yr MBS price +9 bp; the 10 yr note 1.81% -2 bp. At 10:00 the Jan NAHB housing market index, expected at 48 frm 47 in Dec; it was reported unchanged, still the best level since last April. While it remains under 50, the pivot point sales did soften 1 point. NAHB pointed to the fiscal Cliff and debt ceiling issues along with increased payroll taxes for no improvement in Jan data. At 2:00 this afternoon the Fed’s Beige Book will be released; the Fed staff’s report from all 12 Fed districts on details within the regions. Generally not much new but there is more specifics in the districts. The Book is used by the FOMC when it meets in two weeks. Treasuries continue to improve with some safety moves on the debt ceiling discussions; mortgage rates and prices continue to drag along with minor improvements. Technically even with the recent treasury market gains the 10 yr yield is still above its 200 day and 40 day averages and presently sitting right on its 20 day average. 30 yr mortgage prices still unable to move above their 100 day averages, this morning though the 20 yr FNMA also testing its 20 day average. In both treasuries and mortgages the momentum oscillators have moved to neutral levels, neither bullish or bearish momentum.