Don Polletta - CT FHA loans

Mortgage bond prices had another volatile week pushing mortgage interest rates higher. US debt concerns played the biggest factor in rate swings as worries continued that countries would shift out of US dollar holdings. Russia indicated a willingness to move some reserves from US Treasuries to International Monetary Fund bonds. Retails sales rose 0.5% as expected but the positive figure reinforced the belief that the economy is turning. Oil prices continued to escalate hitting over $72/barrel. For the week interest rates rose by 1/4 of a discount point. The consumer price index Wednesday will be the most important release this week. Strength in the other economic data will do little to help mortgage interest rates improve. LOOKING AHEAD

Consumer Price Index The Consumer Price Index is widely accepted as the most important measure of inflation. The CPI is a measure of prices at the consumer level for a fixed basket of goods and services. The National Statistics Office and the Bureau of Agricultural Statistics of the Department of Agriculture collect price data for the computation of the CPI. Since it is an index number, it compares the level of prices to a base period. By comparing the level of the index at two different points in time, analysts can determine how much prices have risen in that period. Unlike other measures of inflation, which only factor domestically produced goods; the CPI takes into account imported goods as well. This is important due to the ever-increasing reliance of the US economy upon imported goods. Analysts primarily focus on the core rate of the CPI which factors out the more volatile food and energy prices. High oil prices continue to weigh heavily upon the financial markets. The health of the economy remains uncertain. The Fed has itself in a precarious position of wanting to stoke the economy amid the real possibility of increased inflation. Market participants expect the consumer price index to be critical heading into the Fed's meeting next week. Inflation friendly data may lead to improvements in mortgage interest rates. However, unexpected consumer price spikes may push interest rates higher in the short-term. A cautious approach to float/lock decisions is prudent. For more news and information about purchasing realestate visit www.HomeMarketingToday.com

Mortgage bond prices had another terrible week pushing mortgage interest rates considerably higher. Personal income, outlays, construction spending, ISM Index, and payrolls data came in stronger than expected. This did little to help the already shattered bond market. Oil prices continued to escalate hitting over $70/barrel. The Fed attempts to keep rates in check were not very effective as selling pressure continued. Bernanke tried to calm the markets by reiterating forecasts of tame inflation but his words fell on deaf ears among bond traders. For the week interest rates rose by about 1 and 1/2 of a discount point. The Treasury auctions will once again take center stage, as the market has to deal with additional supply. Continued strength in the economic data will do little to help mortgage interest rates improve. LOOKING AHEAD

Payrolls

Last week was a prime example of the divergence between the unemployment rate and payrolls figure along with the risk of floating into important data. Unemployment came in at 9.4%, higher than the expected 9.2%, while non-farm payrolls fell 345,000, not as much as the expected 520,000 decline. Mortgage bond prices fell and rates spiked higher. Bond traders hoped the report would provide a solid indication that the labor market remained weak. Unfortunately it left more uncertainty. The unemployment figure is derived from a household survey while the payrolls number comes from an employer report. Energy prices have risen considerably stoking inflation fears amid record debt levels. As a result the low mortgage interest rates that everyone considered a given have quickly gone away. The Fed continues to purchase mortgage bonds in an effort to keep mortgage interest rates low but they face a daunting task as the selling pressure continues. The Fed still has over $700b marked for purchasing additional mortgage bonds. The question remains whether that will be enough to help rates turn lower. So far it appears additional measures are needed. To stay on top of the latest mortgage news and information visit www.ToMortgageServices.com

Finally some great news in the realestate market! It was announced today that HUD approved use of the $8000 tax credit for down payment assistance. The details are still coming out on this one, and I look forward to the impact this could have on the realestate market as a whole:

DONOVAN ANNOUNCES RECOVERY ACT'S HOMEBUYER TAX CREDIT CAN IMMEDIATELY HELP THOUSANDS OF FIRST-TIME HOMEBUYERS TO BUY A HOME
FHA plan will stimulate new home sales and help stabilize housing market

WASHINGTON - Speaking to the National Association of Home Builders Spring Board of Directors Meeting, U.S. Housing and Urban Development Secretary Shaun Donovan today announced that the Federal Housing Administration (FHA) will allow homebuyers to apply the Obama Administration's new $8,000 first-time homebuyer tax credit toward the purchase costs of a FHA-insured home. Donovan said that today's action will help stabilize the nation's housing market by stimulating home sales across the country. Click Here to View the whole press release.

Mortgage bond prices fell last week pushing mortgage interest rates considerably higher. Inflation fears dominated trading. Philadelphia Fed President Plosser warned, "The economy may be at greater risk of inflation than conventional wisdom indicates." A weaker US dollar, escalating oil prices, and concerns about the US debt rating also pressured mortgage bonds lower and mortgage interest rates higher. Trading remained volatile throughout the week but most of the worsening occurred Thursday and Friday. For the week, interest rates rose by about 1/2 of a discount point. The gross domestic product data Friday will be the most important release this week. The additional debt supply associated with the Treasury auctions will also play a critical role in any mortgage interest rate volatility this week. LOOKING AHEAD

US Credit Rating

There are concerns all across the globe that the US will lose its AAA credit rating. Standard and Poor's recently downgraded the UK from stable to negative. Many analysts expect the UK to lose its AAA credit rating. Market participants are concerned the US will follow as deficit spending continues. Bond guru Bill Gross said it would happen in "at least three to four years, if that, but the market will recognize the problems before the rating services - just like it did today." Just as in the case of a consumer, a lower credit rating would mean that the government would pay higher rates to borrow money. This is logical in that an investor requires more return for the additional risk of possibly not being paid on their investment. This would most likely result in interest rates rising on not only Treasuries but also mortgages. As warned last week, it is a great time to take advantage of rates at the current levels to avoid the uncertainty of where mortgage interest rates will be in the future. For more news and information on mortgage rates, or purchasing a home visit www.ToMortgageServices.com

Mortgage bond prices rose last week helping mortgage interest rates fall. Most of the gains came early in the week prior to the surprise inflation data. Weaker than expected retail sales data along with concern about the health of the banking industry helped mortgage bonds improve. Unfortunately stronger than expected producer price and core consumer price data Thursday and Friday stoked inflation fears which erased some of the earlier gains. Trading remained volatile. For the week, interest rates improved by about 1/2 of a discount point. The housing starts data will set the tone for trading this week. Leading economic indicators data may also result in some mortgage interest rate volatility. LOOKING AHEAD

Inflation Concerns Inflation is an increase in the level of prices of goods and services over a period of time. Mixed inflation signs do not generally bode well for mortgage bonds. Inflation erodes the value of fixed income securities generally causing bond prices to fall and interest rates to rise. The mortgage bond market received mixed inflation data last week. The producer price index, a major gauge of inflation at the producer level, rose a surprising 0.3% in April. This figures was considerably higher than the expected 0.1% increase. However, the core rate, which excludes volatile food and energy, rose 0.1%. This figure was exactly as expected. The relatively flat core producer price figure helps reinforce the belief that inflation remains in check. However, the higher than expected producer price figure supports the opposite conclusion. Unfortunately the consumer price index data did little to settle the score. Consumer prices were unchanged in April, as expected. However, the core, which excludes volatile food and energy prices, rose 0.3%, higher than the expected 0.1% increase. Higher core inflation readings are usually terrible for fixed income securities such as mortgage bonds. We saw an example of this Friday morning as bond prices fell and interest rates spiked higher erasing some of the recent improvements. With the mixed data and President Obama recently stating that the US debt load is "unsustainable" the fear of inflation looms. If future data echoes that of the core consumer price data, then it is a real possibility that mortgage interest rates could push higher. However, if future data alleviates some of the recent concerns we could see rates hold steady or even push a little lower. Be aware that floating in this environment is risky. The good news is that mortgage interest rates currently are historically favorable. It is a great time to take advantage of rates at the current levels. For more news and information about purchasing or refinancing a home visit www.ToMortgageServices.com