Askcallie’s Weblog

The 30 year fixed rate is at 6.125% today before adjustments, if any.

Mortgage/Economy news:

Consumer spending was cut in half from March to April, but the drop was forecast by economists.  April is the first month of the second quarter, and a .2% gain is not going to provide much of a boost to GDP.  Even though last quarter’s GDP was revised higher, it stayed extremely low at .9%.  Personal income was only up .2% as well.  Many consumers have been buying on credit the last several years, but as credit dries up and food and gas prices rises, consumers have not felt a strong desire to buy much.

Inflation is easing though according the core PCE price index.  It showed that consumer prices rose just .1% last month.  Believe it or not, oil prices may help bring inflation down as well.  They are back under $127 per barrel this morning, after reaching a record high around $135 a week ago.  Oil prices fell dramatically following Memorial Day weekend last year as well, and they continued to ease going into the summer.  That was when prices were much lower, so if they drop by a similar percentage, we could easily see oil back around $100.

Thought of the day:

Whether or not you reach your goals in life depends entirely on how well you prepare for them and how badly you want them. You’re eagles! Stretch your wings and fly to the sky.
Ronald McNair

The 30 year fixed rate is up today at 6.25% before adjustments, if any.

Mortgage/Economy news:

Interestingly, the higher GDP, up .9% in the first quarter, did not have the affect on stocks that we had expected.  Unfortunately, bonds were hit exactly as we thought they would be.  The stock indexes have begun the day slightly lower, but that could be a product of a lack of excited over GDP coming in just as it had been forecast.  Data that is already expected rarely moves the markets.

The improvement to GDP was attributed to a lower trade deficit.  People weren’t buying from other countries, which is not surprising given that the value of the dollar is extremely weak relative to most other currencies.  It would be much more expensive for them to import goods.  That could be another reason why stock traders have not been electrified by the news.  Consumer spending, which makes up two-thirds of the calculation and is the best indication of economic growth was unchanged.  Cost cutting by domestic companies does not inspire one to believe that the economy is recovering.

Plus, it is even less likely that people will think the economy is getting stronger when the latest weekly jobless claims came in at 372,000.  And, an even more telling sign of the stagnant economy is continued claims, which are up at a four-year high.  Next Friday will be the next report on monthly payrolls.  They have shown job losses in each of the first four months of the year, and economists are estimating another substantial decline in the jobs market for May.

Thought of the day:

Mary Lou Retton

The 30 year fixed rate is at 6% today before adjustments, if any.

Mortgage/Economy news:

While durable goods orders may have fallen .5% overall last month, they hopped up 2.5% excluding transportation (i.e. autos and aircraft).  Everything from machinery to communications equipment to appliances was in high demand, along with all the raw materials used to make them.  This indicates a couple things.  First, it implies that businesses are investing in the future expansion of their business.  It also means that companies may be getting ready to add to inventories in anticipation of stronger demand.  Finally, it appears that factories may be gearing up for even more orders.  It will be interesting to compare this number with consumer spending on Friday to see if there really is increasing demand from shoppers.

Oil prices have dipped drastically since last Friday’s peak.  They were under $127 at one point this morning.  Although they have risen a bit off their lows, they are holding under $129 per barrel.  We saw a similar reaction last year.  Prices reached extreme highs (for back then anyway) right before Memorial Day when greater travel is anticipated, and then it promptly retreated heading into the summer.  There is certainly a good chance that this could happen again, since the timing coincides with reports that demand is decreasing.

Tomorrow’s GDP revision could be a turning point.  If it is revised lower than the .6% reported last week, which is not expected, then the economy could be on the brink of recession.  On the other hand, an improvement, as is forecast, might lead investors to believe that a recession has been narrowly avoided and perhaps the worst is behind us.  That’s why we see this as the most significant data of the week.

Thought of the day:

Ability may get you to the top, but it takes character to keep you there.

John Wooden

The 30 year fixed rate is at 5.875% today before adjustments, if any.

Consumer confidence sank again in May. The Conference Board’s consumer confidence index fell to 57.2, the lowest in 16 years. Soaring gas prices are no doubt a big reason for slumping confidence, but ironically, oil prices have slipped back to around $130 per barrel this morning. Estimates from the Federal Highway Administration and AAA show that road trips over Memorial Day weekend were lower than normal. It could mean that families are going to scale back on unnecessary trips this summer as well. The lower demand would help counter the perceived shortages in supplies. Based on consumer confidence readings these past couple months and the spike in oil prices, summer could be sluggish for economic growth. However, lower demand could gradually bring oil prices down, and we might see an economic pick up by the time school gets back in session.

New home sales may have been better than economists’ forecast, but they are way too low for anyone to care. Neither of this morning’s reports seems to have swayed the markets, especially since they were mixed between strength and weakness. Thursday’s GDP report is the only data this week that we feel can have a massive impact on the financial markets. We think the consensus estimate for a slight improvement is probably accurate. Any extra growth might send stocks racing higher though, leaving bond prices in the dust.

Thought of the day:

Only those who dare to fail greatly can ever achieve greatly.

Robert F. Kennedy

The 30 year fixed rate is at 5.875% before adjustments, if any.

At the risk of sounding like a broken record (or CD in the 21^st century), oil hit another new record high.  They have now topped $131 per barrel after the government reported that U.S. oil reserves declined sharply last week.  The inflation fears based on yesterday’s PPI will continue into today now that oil keeps adding to threat of quicker inflation.

The 30 year fixed rate is at 5.75% before adjustments, if any.

April PPI (Producer Price Index) was a mixed bag and may have had a little more affect on the markets than we had anticipated.  Overall PPI only rose by just .2%, which was a complete turn around from the 1.1% increase in March.  And, ironically, gas prices fell for the month, causing the better than expected result.  However, core PPI, which excludes food and energy expenses, rose by .4%.  That was double what economists had forecast.  The core number generally receives more of the attention, despite the fact that energy and food are necessities that obviously have a large impact on businesses’ ability to spend money elsewhere.

Oil prices set a new record this morning, this time topping $129 per barrel.  OPEC has said they refuse to increase production.  While some camps argue that prices are rising purely on speculation, while others believe it is truly based on a shortage of supply, everyone thinks that prices are going to continue to rise.  We would have to agree since either of those two possible causes would lead to higher prices.

Thought of the day:

Arnold Glasgow

(Provided by Steve Hale~Georgia Platinum Mortgage)

The 30 year fixed rate is at 5.875% today before adjustments, if any.

Thought of the day:

Nothing purchased can come close to the renewed sense of gratitude for having family and friends.
Courtland Milloy

The 30 year fixed rate is at 5.875% today before adjustments, if any.

Some big news from Fannie Mae today.  They repealed a rule they had set in place last December.  That rule required people buying houses in areas where average home prices were declining to pay higher down payments.  They are now allowing 3 – 5% down payments for all homes again, which they hope will help revive the troubled housing market.

Housing starts jumped last month from 947K to an annualized 1.03 million.  However, construction of single-family homes fell.  The extra building was in multi-family housing, most likely prompted by rising rental income and the need for more rental properties as homeowners are unable to keep their houses.  Since it is the single-family housing that is putting such a drag on the economy, the better than expected data is not as positive as it seems at first glance.

Thought of the day:

Happiness is a butterfly, which, when pursued, is always just beyond your grasp, but which, if you will sit down quietly, may alight upon you.
Nathaniel Hawthorne

The 30 year fixed rate is at 6% before adjustments, if any.

Most of this morning’s economic data was weaker than expected, which is why bond prices have been able to pop back up.  The first of those reports was weekly jobless claims.  They were almost identical to last week at a rather high 371,000.

The other early report was the Empire State Index, measuring manufacturing activity in the New York region.  Economists had forecast a very small improvement, but instead they got a drop to -3.2.  This indicates a contraction in the sector.  The Philadelphia Fed Survey, which is now being released at 10:00 AM ET instead of 12:00 PM, showed a much larger contraction in the Philly region, but it was almost 10 points better than forecast.  The survey came in at -15.6 versus expectations of -20.0.  Nevertheless, manufacturing continues to struggle, and it has not been helped any by the slowing in the housing market and the economy as whole.

Thought of the day:

The greatest thing in this world is not so much where we stand as in what direction we are moving.

Johann Wolfgang von Goethe