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Mortgage Update 1.6.15

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Blog by Doug Ingersoll | January 6th, 2015

Mortgage news from Stuart Crawford:

**2015 OUTLOOK – Attached to this email is a summary of Freddie Mac’s Chief Economists outlook.  I have high-lighted areas of interest, and here is a brief list of the topics:
1)     The purchase market will strengthen.
2)     The consumer’s refinance days are slowly being eliminated (now is the time).  Mortgage rates will be nearing the 5% range at the end of 2015.
3)     NOW is the time for any potential buyers to “get off the fence”, as home values and rates will rise resulting in a “pinch” in consumer affordability.    
Weaker than expected U.S. economic data and concerns about the pace of global economic growth helped bonds and hurt stocks during the New Years’ week.  Mortgage rates ended the week a little lower, and they begin 2015 slightly less than where we started in 2014.   

The biggest economic report released last week was Friday's ISM National Manufacturing index.  The ISM index declined to 55.5, which was well below the consensus forecast, and the shortfall caused mortgage rates to improve.  The ISM index measures whether the manufacturing sector is expanding or contracting.  Readings above 50 generally indicate expansion, so this week's data suggests further improvement in the sector, but possibly at a slower pace than seen in recent months.

At the beginning of 2014, most forecasters predicted that stronger economic growth would cause mortgage rates to increase by the end of the year.  Faster growth increases expectations for future inflation, which is negative for mortgage rates.  In fact, we did experience even better economic growth than had been anticipated, yet mortgage rates fell.  The explanation is that expectations for future inflation did not increase even with the upswing in our country’s economic growth.  Outside the U.S., the pace of economic growth fell far short of the predicted levels.  This held down global inflation levels, supporting lower mortgage rates.

This week, the important monthly Employment report will be released on Friday.  As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month.

Click HERE for the report