Daily Commentary by Larry Baer: If this run-up
to the presidential election follows prior precedent - look for trading
activity in the mortgage market to tighten up - with the battle between buyers
and sellers producing little in the way of significant movement in terms of
note rates until the election results are deemed finalized and official. Even an off-of-the charts headline nonfarm
payroll number (170,000 new jobs or more) will not likely create a correspondingly
explosive upward move for mortgage interest rates. Note that I'm not saying a strong improvement
in the labor picture on Friday won't put some upward pressure on rates - I'm
just saying any upward pressure will be mitigated to a fairly significant
degree by investors' reduced appetite for risk in front of a major national
election.
Mortgage investors
will be keeping one eye on the damage estimates from Hurricane Sandy. The storm is expected to go into the record
books as one of the biggest storms ever to hit the United
States.
Sandy's sheer breath - 10 states have declared a state of emergency -
means it will likely take a toll on this quarter's domestic economic growth -
even if the long-term impact ultimately proves neutral. While the impact on those people
individually affected by the storm may be long lasting and more than worthy of
our thoughts and prayers - the blow to the national economy will almost
certainly be short-term. From the cold,
hard perspective of the capital markets - Hurricane Sandy will support the
near-term prospects of steady to fractionally lower mortgage interest rates --
but that support will fade rapidly as recovery and rebuilding kicks off in a
big way during the first three months of 2013.
Mortgage investors
shrugged-off the Q3 Employment Cost Index figures released by the Bureau of
Labor earlier this morning. Employer
cost rose 0.4% during the three months from July through September, a miniscule
drop compared to the prior quarter's 0.5% increase. The major take-away for traders from this
report is that wage pressures are still minimal - a confirming signal that
wage-benefit inflation pressures remain benign.
The wage and benefit bargaining power of employees will not return until
there is a sustained improvement in hiring - and that is a condition not
expected to occur for several more quarters.
As they do every
Wednesday, the Mortgage Bankers of America have released their Mortgage
Application Survey figures for the week ending October 26th. A fourth consecutive decline in refinance
applications dragged the overall index down 4.8% from the prior week. The number of purchase applications improved
a meager 0.5% for the period. Refinance
applications accounted for 80% of all applications taken and 77% of the prospective
loan volume for the week.
The contract rate
for 30-year fixed rate conforming mortgages rose by 2 basis points to
3.65%. The interest rate is 12
basis-points higher than four weeks ago, but still 66 basis-points lower than
the year-ago mark.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
