Mortgage Market Recap for the week ending Friday October 5th, 2012

October 19, 2012 Marc Edelstein Mortgage Real Estate Market Review 0 Comments

An improving US economic outlook and increased optimism about Europe were unfavorable influences on mortgage rates this week. Fed purchases of mortgage-backed securities (MBS) under QE3 helped offset the losses, though. As a result, after several weeks of declines, mortgage rates ended the week just slightly higher.

Friday’s Employment report was the big news this week. Against a consensus forecast of 120K, the economy added 114K jobs in September, but the data from prior months was revised higher by 86K. The Unemployment Rate unexpectedly dropped to 7.8%, the lowest level since January 2009, from 8.1% last month. Average Hourly Earnings, an indicator of wage growth, increased moderately from August. Any way you look at it, the September data exceeded expectations. This increases future inflationary pressures, which is negative for mortgage rates.

The results for the change in the number of jobs and for the Unemployment Rate are derived from different pools of data, and sometimes the two sources show wide discrepancies in a particular month. The Unemployment Rate is based on a survey of a small sample of households, and it can be extremely volatile, while the Payrolls data is based on information collected from businesses and tends to be more precise. This month, the household survey showed a gain of 783K jobs, which was the highest level since 1983, and far above the increase seen in the Payrolls data. Over longer periods, the two sources generally show similar results, but not necessarily in the short-term.

Next week, the Fed’s Beige Book will be released on Wednesday. Import Prices and the Trade Balance will come out on Thursday. The Producer Price Index (PPI) focuses on the increase in prices of “intermediate” goods used by companies to produce finished products and will come out on Friday, along with Consumer Sentiment. In addition, there will be Treasury auctions on Tuesday, Wednesday, and Thursday. Mortgage markets will be closed on Monday in observance of Columbus Day.

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