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Mortgage Updates from Richard Silva and Stuart Crawford

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Blog by Doug Ingersoll | February 9th, 2016

Richard Silva with Lone Star Home Lending can be reached at  602.373.3654:

"Should I stay or should I go now?" The Clash. Investors asked that question all week as they considered in which markets they may have overstayed their welcome. Economic data sent mixed messages as to whether Stocks or Bonds would be more gracious hosts to investment dollars.

Case in point: After a whirlwind of job creation in October, November and December, the January Jobs Report showed a bit of a slowdown, according to the Labor Department. Payrolls rose by 151,000 in January. While still strong, the number is dwarfed by year-end leaps that helped make 2015 the second-best year for job creation since the late 1990s. The report also noted the Unemployment Rate dropped to 4.9 percent while wages increased, which is great news.

In other events, inflation remained tame, manufacturing data was weak and personal spending was unchanged from the prior month.

So, what does all this have to do with buying or refinancing a home?

When investors move dollars from Stocks to Bonds, Mortgage Backed Securities and other Bonds improve. Because home loan rates are directly tied to Mortgage Bonds, home loan rates can improve as well. Last week's trading illustrated this, pushing home loan rates to lows not seen since April 2015.

On the housing front, home prices, including distressed sales, rose 6.3 percent from December 2014 to December 2015, according to CoreLogic, a leading global property information, analytics and data services provider. From November to December, prices were up 0.8 percent. CoreLogic cited strong demand and tight supply for the gains.

Looking ahead, home prices are expected to rise 5.4 percent from December 2015 to December 2016.

Stuart Crawford with VIP Mortgage can be reached at  480-776-2954:

Most of the economic data released over the past week fell short of expectations.  However, strong wage growth in Friday's employment report offset some of the weakness perceived in the other data and mortgage rates ended the week a little lower.

Against a consensus forecast of 190K, the economy added 151K jobs in January.  This was down from average gains of about 280K over the prior three months.  The unemployment rate declined from 5.0% to 4.9%, the lowest level since February 2008. 

While job gains in January were a little lower than expected, investors focused more on the surprisingly strong wage growth.  Average hourly earnings, an indicator of wage growth, rose 0.5% in January, which was well above the consensus forecast.  Investors raised their outlook for future inflation based on the wage data, forcing mortgage rates a little higher after the report.

By contrast, nearly all of the data released earlier in the week was positive for mortgage rates.  U.S. manufacturing activity has slowed sharply in recent month, with the ISM national manufacturing index at the lowest level since 2009.  The stronger dollar and weakening demand in other countries have hurt the sector.  Surprisingly, manufacturing makes up a relatively small portion of U.S. economic activity.  More disturbing to investors, the ISM national services index declined to the lowest level since early 2014.  The service sector represents over 80% of the U.S. economy.

Looking ahead the big report will be Retail Sales, released on Friday.  Consumer spending accounts for about 70% of economic output in the U.S., and the retail sales data is a key indicator of how the economy is doing.