Archives for February 2015

February 2015 Chicago PMI

Mortgage rates we’re influenced today by a weak Chicago PMI report.  February’s Chicago PMI fell to 45.9 (missing expectations of 57.5).  This is the lowest it’s been since July 2009. Also, this is the biggest drop since the collapse of Lehman Brothers in Oct 2008. New Orders suffered the largest monthly decline on record, leaving them at the lowest since June 2009.

Some say the bad report is the result of bad weather and the west coast port shut down.  While the port issue probably caused some problems; the weather seems to be a weak argument since it is February and that generally means bad weather.

Pending home sales miss expectations January-2015

Despite near record low mortgage rates, January pending home increased below expectations.  The modest growth, just under 2%, is the 5 month in a row that the report came in below expectations.  Mortgage interest rates were supposed to help the purchase market however there is little evidence that happened.

The consistently and somewhat overly optimistic NAR economist Lawrence Yun issued the following statement:

“For the most part buyers in January were able to overcome tight supply to sign contracts at a pace that highlights the underlying demand that exists in today’s market. “Contract activity is convincingly up compared to a year ago despite comparable inventory levels,” he said. “The difference this year is the positive factors supporting stronger sales, such as slightly improving credit conditions, more jobs and slower price growth.”

Wages increase for some retail employees

First Walmart and now TJ Max.  Both retailers have decided to increase bottom line wages for the average worker in an effort to increase worker moral.  “This pay initiative is an important part of our strategies to continue attracting and retaining the best talent in order to deliver a great shopping experience, remain competitive on wages in our U.S. markets and stay focused on our value mission,” TJX Chief Executive Carol Meyrowitz said in a statement.

Will other retailers follow?  Good question that remains to be answered.  And why is this important to mortgage rates?  One of the first signs of inflation is an increase in wages however it’s not always 100% certain that if wages increase so does inflation (inflation is bad for mortgage rates). Instead of inflation we may just see margins squeezed if these retailers cannot raise prices.

CPI Declines in January 2015

Last month consumer prices posted their largest drop since 2008 as gas prices continued to fall. Economists polled by Reuters had forecast the CPI falling 0.6 percent last month and slipping 0.1 percent from a year ago. This might be enough to keep the Fed from raising rates anytime soon. The Labor Department said the CPI fell 0.7 percent last month, the largest decline since December 2008, after falling 0.3 percent in December. It was the third straight month of decline in the index.  Over the last year the CPI increased fell 0.1 percent, the first decline since October 2009 and a sharp drop from November’s 0.8 percent rise.

Delinquencies continue downward trend

Source: Black Knight Financial

Delinquencies continued their move lower and dropped 11% from January 2014, according to the latest report from Black Knight Financial Services.  January’s 94,300 foreclosure starts were the highest level of starts since December 2013, up 5.48% month-over-month and 0.21% year-over-year.

Meanwhile, prepayment rates — historically a good indicator of refinance activity—dropped 23% from December, though it remains up 19% from this time last year.