Virginia Beach Real Estate: Mortgage Market Review June 16, 2008
June 17th, 2008 by Dave MacklinMortgage bond prices fell pushing Virginia Beach real estate mortgage interest rates higher.
Market CommentMortgage bond prices fell pushing Virginia Beach real estate mortgage interest rates higher. Inflation fears were fanned once again by Fed Chairman Bernanke with warnings that the Fed may have to begin raising rates sooner than most analysts expected. Stronger than expected retail sales figures piled on an already battered mortgage bond market pushing bond prices lower and rates higher. Oil prices remained volatile, which continued to fan inflation fears. For the week, interest rates on government and conventional loans rose over a full discount point.
The producer price index Tuesday will be the most important event this week. Housing starts, industrial production, capacity use, and leading economic indicators data may also move the market. Expect oil and stocks to continue to factor into trading, as inflation fears remain.
LOOKING AHEAD
| Economic Indicator |
Release Date & Time |
Consensus Estimate |
Analysis |
| Producer Price Index | Tuesday, June 17, 8:30 am, et |
Up 1.0%, Core up 0.2% |
Important. An indication of inflationary pressures at the producer level. Decreases may lead to lower rates. |
| Housing Starts | Tuesday, June 17, 8:30 am, et |
Down 5.1% | Important. A measure of housing sector strength. Larger than expected decreases may lead to lower rates. |
| Industrial Production | Tuesday, June 17, 9:15 am, et |
Up 0.1% | Important. A measure of manufacturing sector strength. A lower than expected increase may lead to lower rates. |
| Capacity Utilization | Tuesday, June 17, 9:15 am, et |
79.7% | Important. A figure above 85% is viewed as inflationary. A decrease may lead to lower mortgage interest rates. |
| Leading Economic Indicators | Thursday, June 19, 10:00 am, et |
Unchanged | Important. An indication of future economic activity. Weakness may lead to lower rates. |
| Philadelphia Fed Survey | Thursday, June 19, 10:00 am, et |
None | Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. |
Weather
The mortgage interest rate markets are subject to an enormous number of factors. Most analysts agree that weather can have an effect on market activity. Although the effects are seldom long lasting, they can be quite significant.
The United States is the world’s largest exporter of corn. Relatively rainy weather recently across the Midwest portions of the United States has delayed planting of corn. This caused corn prices to escalate. Wheat and other staples are also in high demand amid reduced supply, causing prices to rise. Couple these factors with rising energy costs and the picture does not look pretty. Higher commodity prices result in heightened inflationary fears. Many analysts predict the food price increases already seen most everywhere will continue.
The weather also has the potential to directly alter fuel prices. As we enter the hurricane season, many oil and gas fields in the Gulf along with refineries along coasts are susceptible to damage. If this were to occur, oil prices would almost surely rise sharply. Rising oil prices would do little to help mortgage bond prices already pressured by inflationary fears. The result would most likely be higher rates.
The economic effects of various weather occurrences may cause only temporary changes in economic activity. However, those times of change can have a lasting impact on people obtaining mortgages. Despite the rate increases seen recently, mortgage interest rates remain historically favorable for borrowers. Now is a great time to take advantage of rates at these levels.
Information provided by Fred Levine, Union Mortgage Group, (757) 287-0551.
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