Weekly Mortgage Rate Review--Much Ado About Nothing, September 17, 2010

Yawn!--This week appeared at the outset to have the potential for dramatic moves in mortage rates due to the quantity of economic data released.  Yet, in the end, after moves down and up, we find ourselves essentially back where we began.  I suppose it really shouldn't be that surprising given the time of the year and lack of clarity in both the data and the political environment.

I want to discuss a report this week on a sizable increase in foreclosure filings, but first a review of mortgage rate movement for the week. 

Week in review

Monday was a big day in the mortgage-backed securities market with these "safe" investments gaining a lot of support.  With no economic data released, markets were moved more by technical factors rather than any discenable trends.  Tuesday continued the positive trend despite a positive retail sales report.  Traders seemed to be expecting bad news and traded as if they had actually received it.

Wednesday's trades seemed more like a reaction to Tuesday's positive news than a response to new data that was mixed--industrial production increased slightly, while the NY Empire State Manufacturing Index dropped to the lowest level in a year.  Thursday gave us more mixed data with stronger producer prices, lower jobless claims and a drop in Philadelphia Fed region manufacturing.

Friday was volatile with repricings for the better in the morning and for the worse in the afternoon. Lower consumer prices were reported along with lower consumer sentiment figures.  When all was said and done, much like last week, we find ourselves almost exactly where we finished last Friday.

Foreclosures jump

A real estate data organization released a report this week showing that foreclosure filings by holders of mortgage loans had increaased for August over July by a fairly significant margin.  While lower than record levels from 2009, this latest increase is a sign that banks are accelerating their efforts to clear their books of bad loans.

While this data obviously means that housing prices will continue to be under downward pressure due to the increase in supply on the market, it is all part of the necessary cleansing process for banks, homeowners (and former homeowners) and for our economy in general.  I don't mean to make light of the pain that is inherent in these figures, yet a positive future can only begin when the troubles of the past are dealt with definitively.  

Next week

The Federal Reserve Open Market Committee meets on Tuesday.  While no change in interest rates is anticipated, the statement released by the committee can, and does, move mortgage rates.  Also next week we will get a look at housing data, leading economic indicators and durable goods orders.