Colorado Home Mortgage Banking

The week’s headline economic report showed that inflation rose far more than expected in July, yet mortgage rates barely reacted and ended the week essentially unchanged. The July Consumer Price Index (CPI), the most widely watched inflation indicator, rose at the fastest annual rate since 1991. The core rate, which excludes the volatile food and energy components, rose at a 2.5% annual rate. The Fed’s perceived comfort level for core inflation is between 1.5% and 2.0%.

Mortgage rates usually move higher after an unexpected increase in inflation. This time they did not. Investors have started to expect that inflation levels will diminish later in the year and point to a couple of factors. First, slower economic growth in major global markets will reduce demand for goods and energy. In addition, a stronger US dollar will lower the cost of imported goods.

Even the Fed’s Stern, noted for his vigilant anti-inflation stance, stated that he expects inflation to come d own after the third quarter. To summarize, economic weakness at home and abroad, a stronger dollar, and a decline in oil prices offer hope that future inflation levels will be lower.

The Economic Calendar will be very light next week. The Producer Price Index (PPI) will come out on Tuesday. PPI focuses on the increase in prices of “intermediate” goods used by companies to produce finished products. Housing Starts will also be released on Tuesday. Leading Indicators and the Philadelphia Fed index will come out on Thursday

Colorado Online Mortgage rates take another hard hit today.  We are at our highest 30 year fixed Colorado Online Mortgage rate for 2008.  Historically speaking Colorado Online Mortgage rates are still good, but certainly not as good as they were 3 months ago.  So why are we facing all of these price increases to our Colorado Online Mortgage rates?  The answer is simple:  Inflation.  The fear of inflation is the biggest cause for movement in the Colorado Online Mortgage markets.  Investors holding on to long term bonds see the value of those bonds decrease as the value of on money decreases.  Colorado Online Mortgage rates are tied to a fixed rate income stream and anything impacting that income stream will cause Mortgage Backed Securities to drop in value.  Colorado Online Mortgage rates react inversely to the price of bonds, which is why Colorado Online Mortgage rates have gone up. 

Now what information do we have to show that inflation is on the rise?  Consumer Price Index and Producer Price Index are both leading economic reports showing inflationary pressure.  Both reports have major impacts on Colorado Online Mortgage rates, but interestingly enough, both reports came in better then expected for the month of May.  So why does inflation appear to be a problem?  More importantly why is it impacting Colorado Online Mortgage rates?  Well another big mover of Colorado Online Mortgage rates come from information released by the Federal Reserve.  When the Federal Reserve speaks investors listen very closely.  So closely in fact that they tend to read into things that may or may not have been the intent of those releasing the information.  Colorado Online Mortgage rates tend to jump up when Federal Reserve members begin to talk about inflation. 

Richard Fisher the Federal Reserve board member representing the Southern States spoke to the media earlier today.  Mr. Fisher expressed great concern about inflation stating that Americans should be wary of “stirring the embers of inflation.”  Colorado Online Mortgage rates jumped quickly on fears that inflationary numbers will appear higher in the months to come.  Another major fact on inflation comes in oil prices.  This is something we can see now and it is right in front of us.  The cost of shipping increases when oil prices are high.  When Shipping costs go up so do prices, which is what inflation is.  It’s hard to know exactly what will happen in the months to come as it relates to Colorado Online Mortgage rates.  It appears that there is a struggle between bad economic data, which is good for Colorado Online Mortgage rates and inflationary concerns which is bad for Colorado Online Mortgage rates.  Depending on what investors are motivated by, will dictate what direction Colorado Online Mortgage rates will go.

Colorado Online Mortgage rates were also impacted by new home sales which was the only official economic report released today.  The numbers came in far better then expected which created even more momentum as it relates to the increases seen in Colorado Online Mortgage rates today.  Finally we are seeing signs of an economic Term not used since the Reagan administration: “Stagflation” A real problem and an obvious answer to what is going on today.  You can read more about this at www.coloradohomemortgageloan.net/news.  You may find that to be an interesting read.

The final analysis for the day will be whether to Lock or Float.  It’s hard to recommend Floating when Colorado Online Mortgage rates continue to rise.  It’s even harder when there are no obvious signs that Colorado Online Mortgage rates will stop rising.  However if you are looking at the long term picture FLOATING makes sense.  If you are closing in 15 days or greater then FLOATING may pay off.  Most investors have hedged a considerable amount in the pricing for a 30 year fixed Colorado Online Mortgage rate.  They may be a bit too cautious and in return Colorado Online Mortgage rates are worse then they should be.  Colorado Online Mortgage rates have room to drop but we may not see any drops soon.  Especially, if Bernanke speech tonight reaffirms Fishers concerns on inflation.  Fisher is known to fear inflation and to have that as his primary focus, but if the big man on the board begins to sing the same tune, we will see Colorado Online Mortgage rates go up even further.  If you can LOCK a 30 year Colorado Online Mortgage rate for 6.0% then go ahead and LOCK.  I am moving my new LOCK recommendation to 6.0% and will push my clients to LOCK in at that Colorado Online Mortgage rate.  I expect that we will gain some of the lost ground for Colorado Online Mortgage rates over then next few weeks, but for now Inflation continues to be the hot topic which is bad for Colorado Online Mortgage rates. 

If you have questions or need any help with your Colorado Online Mortgage please give me a call directly.

Daniel  

As expected the Colorado home mortgage market was off to a tough start, mainly still affected by the news from yesterday.  We had a couple of new economic reports come out today, both coming in lower then expected.  This should start sending Colorado home mortgage rates downward through today.  I expect that this movement will continue through early to mid next week sending Colorado home mortgage rates even lower.  If the economic data continues to be negative we will see much of the increases experienced this week go away by next week.  With that said we need to focus on historical data and historically Colorado home mortgage rates continue to come in lower then the two year average.  Colorado home mortgage rates reporting under 6% is still good, we have just become so accustom to low rates that we believe that this is the norm and it just isn’t.  I am still putting in a FLOAT recommendation, but be prepared to lock if we get anywhere near the 5.5% range.  Locking at 5.5% will always be a win win for you.  By looking at the economic data released today, our fear of inflation got some good news. Personal income and outlays were reported this morning.  This report measures a consumers personal income and the source of that income while calculating a persons spending habit and what they are spending their income on.  This report is generated once a month and is a good measurement with other reports to help gauge which direction inflation will move.   Rising income and spending numbers can depict a growing economy, however it will also indicate inflation is on the rise.  Colorado home mortgage rates do not respond well to inflation and luckily for Colorado home mortgage rates the news worked to its advantage today.  However we will need to continue to monitor these  reports closely, because it also sends a message to those impacting Monetary Policy (Feds) that we still have room for more short term interest rate reduction.  When the Fed’s lower short term interest rates investors begin to respond to their fears on inflation.  Investors know to well that making money cheaper will only create more spending, which is what the Federal Reserve wants to do.  If spending becomes too prevelant inflation will get out of control, making a fixed investment less valuable and in return increasing Colorado home mortgage rates.  The Federal Reserve has taken the position that they will do just about anything to keep us spending including lowering interest rates to an unhealthy level.  Colorado home mortgage rates will respond well to the level of concern related to the economy, but if inflation runs wild expect a very large increase to Colorado home mortgage rates.  So far so good, but lets keep a very close watch on any report signaling inflationary pressures.  Recommendation: FLOAT lets see what next week brings us.  Remember to check out www.coloradohomemortgageloan.net Daniel