Daily Commentary by Larry Baer: Producer prices displayed broad-based weakness in December supporting the outlook for relatively steady mortgage interest rates for the foreseeable future.
According to Commerce Department figures, headline producer prices fell 0.1% in December following a 0.3% gain in November. It was the second drop for this measure of prices paid for raw, partially processed, and finished materials/goods at the factory, farm and refinery gate over the past three months. Excluding the volatile food and energy components, the so called "core rate" of the producer priced index rose a stronger-than-expected 0.3% last month, fueled by a big gain in prices for light trucks. Mortgage investors shrugged off the uptick in the core rate since it remains abundantly clear there is little opportunity for producers to push through price increases with any realistic expectation such increases will hold. Low inflation expectations are almost always supportive of the prospects for steady to perhaps fractionally lower mortgage interest rates.
In a separate report the Federal Reserve said industrial production rose in December as manufacturing rebounded 0.4% on a month-over-month basis. It was the strongest monthly performance of the year and added to a body of economic evidence indicating 2011 ended on a much stronger footing than where it began. Capacity Utilization, a measure of how fully firms are using their resources, rose to 78.1% from 77.8% the prior month - a nice gain but still 2.3 percentage points below the 1972-to-2010 average. There is certainly nothing contained in this report likely to threaten the current level of mortgage interest rates.
As they do every Wednesday, the Mortgage Bankers of America have released their Mortgage Application Survey for the week ended January 13th. The composite index posted a big 23.1% gain over the past week. This overall measure of single-family loan application traffic is up 23.8% over the past four weeks -- and is up a whooping 60.5% from the year ago mark.
Purchase money loan requests where up 10.3% for the week, up 7.6% from four weeks ago, and up 3.6% from this time a year ago.
The number of applications taken for refinance requests posted a 26.4% gain on a week-over-week basis, and was up 42.6% from four-weeks ago and is up a blockbuster 88.0% from the year ago mark. Refinance applications accounted for 82.2% of all applications taken last week and represent 83.2% of all pending loan closings.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
