Daily Commentary by Larry Baer: Republicans launched a new political tactic
intended to wring more "fiscal cliff" spending cuts out of President
Obama and Democrats. Speaker Boehner announced Republicans plans to
present their own tax bill in the House. No one expects the bill, which
would extend low tax rates except on incomes of $1 million and above, and make
significant cuts to major government entitlement programs, to pass in the
Democrat controlled Senate. Even so, by passing such a measure in the
House -- Republicans believe they can reasonable argue they did what they could
to stop tax hikes and the full impact of the "fiscal cliff" from
slamming into the already fragile economy.
House Speaker
Boehner and most Republicans are seeking $1 trillion in spending cuts for $1
trillion in increased revenues from new taxes. Obama's latest offer
includes $400 billion in spending cuts for $1 trillion in increased
revenue. The two sides are also still far apart on a debt-ceiling
increase. Obama wants a 2-year increase; Boehner wants to raise the
debt-limit for a year.
Each side continues
to raise the political stakes - and further jeopardize the fragile economic
recovery currently underway. Even so, many say the mood on Capitol Hill
is still guardedly optimistic a deal to avert the "fiscal cliff" is
possible by year-end.
If/when a political
compromise is reached to avoid the "fiscal cliff" -- stocks will
likely rally at the expense of rising mortgage interest rates (as long as the
deal is something more than a simple extension of the current deadline).
Until/unless a fiscal agreement is achieved - a primary support for steady to
perhaps fractionally lower mortgage interest rates will remain firmly in
place. Economic data may cause a temporary little flutter in the market -
but any substantial shift in the current trend trajectory of mortgage interest
rates will almost certainly be tied to events surrounding the looming
"fiscal cliff".
In other news - the
Commerce Department announced early today groundbreaking for home building fell
3.0% last month. Single-family home starts, the largest segment of the
market, fell 4.1% while multi-family starts slipped 1.0%. Permits for
future home construction climbed 3.6% higher in November. Permits for
single-family homes dipped 0.2% while multi-family permits increased
10.6%. Mortgage investors gave this data nothing more than a
disinterested glance.
As they do every
Wednesday, the Mortgage Bankers of America have released the Mortgage
Application survey figures for the week ended December 14th.
According to the MBA purchase and refinance activity fell by 4.8% and 13.8%
respectively, dragging the composite index 12.3% lower. Refinance
applications constituted approximately four out of every five mortgage
applications taken last week.
The contract rate
for 30-year fixed rate-conforming mortgages increased during the survey week by
3 basis-points to 3.5%. The interest rate is 58 basis-points lower than
this time one-year ago.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
