Market News Update - Interest Rates on the Rise

Friday’s employment report could be a big game changer if the data shows hiring continues to remain strong.  Last month 204,000 jobs were added, which were more than expected.  ADP on Wednesday of this week released their report, which showed private sector hiring to be quite strong.  With a strong ADP report, and if a strong employment report comes out Friday morning, that could very well put pressure on the Fed to once again begin discussing the tapering of the stimulus program.

As of late, mortgage rates have risen almost to their highs for 2013 and it appears that any significant decline in the future is highly unlikely.   Although recent housing reports are not as strong as earlier in the year, other sectors of the economy seem to be doing better.  The Fed, for better or worse, does not make their future stimulus plans based solely on the housing market.  They look at the overall health of the economy, which can lead once again to investors trading on Fed stimulus speculation.

Auto sales for the month of November were at the highest level ever for the month.  When you combine that with lower first time jobless claims and higher than expected GDP, the signs are there that pressure could mount on the Fed to make at least some changes to the current stimulus program.

Housing, which was once the bright spot of the recovery then dipped, seems to be improving once again.  There were 2 new homes sales reports released on Wednesday.  The reason for the double reporting is that the September report was delayed due to the government shut down.

The new home sales reports send a mixed message, as sales for September declined 6.6%.  However, October figures showed a 25.4% surge in new home sales.  The rate of sales annualized is 444,000, which is the highest pace since early this year.  Because of the big jump in sales the housing supply declined from 6.4 months down to 4.9 months.

The other report released this week on housing was regarding construction spending.  The latest report showed that spending increased .8%, which was more than expected.  The concerning part of the report is that the majority of the increase was in the multifamily sector versus in single family homes.

On the flip side of housing, the impact of higher mortgage rates is showing up loud and clear in the mortgage application index released by the Mortgage Bankers Association of America.  The latest report shows that purchase applications declined 4.0% and refinance apps plummeted 18%.  The continued trend of declining purchase applications could indicate weaker reports in new homes sales and existing home sales in future reports.

Next week’s market moving reports are:

·        Wednesday December 11^th - MBA Purchase Applications

·        Thursday December 12^th – First Time Jobless Claims and Retail Sales

·        Friday December 13^th – Producer Price Index

 I appreciate your business and look forward to talking to you soon! Have a great day!!!
 

Sincerely,

Cindy Tomlinson
Loan Officer

USLending Company

BRE Lic # 01520422
NMLS # 214851   

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