Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – September 4th, 2007

Inflation OK, But Friday Will Tell

Market Jitters

As expected, it has been grueling, trying to get past that stubborn 200-day moving average.  The stock market started to rebound, which hurt interest rates earlier last week.  Also hurting rates was the fact that the Federal Reserve Board’s Minutes, from their last meeting, didn’t give us any hints as to what they will do on their September 18^th meeting.  Most expect the Fed to lower the overnight rate from 5.25%, however, the market’s a little jittery right now, as you can imagine. 

Jobless Claims Increasing?

This week’s Initial Jobless Claims numbers were reported at 334,000.  It wasn’t too long ago that the expected weekly number was coming in at approximately 300,000.  The week before we hit 325,000.  We’re watching this closely because recently, waged-based inflation was a real concern with the Federal Reserve.  If the unemployment numbers start to grow, there isn’t as much pressure to pay people more for the same services, easing these inflationary concerns.  Remember, inflation is interest rate’s nemesis! 

Fed’s Favorite Inflation Gauge Keeping Things Cool

The Gross Domestic Product numbers were revised to 4.0% for the second quarter.  Lower than the expected 4.1%, however not a recessionary figure.  We’re still experiencing positive economic growth.  The long awaited Core Personal Consumption Expenditure Index came in less than expectations at 0.1%.  Keep in mind that this is the Federal Reserve’s favorite gauge on where inflation is.  The PCE tame reading on inflation should have helped bonds, however, interestingly, the stock market read this as support that the September 18^th meeting would surely have a cut, and the move to the stock market actually hurt bonds…what a catch 22, hey? 

FHA Refi’s To The Rescue?

Now, what’s all over the news is President Bush’s speech on tackling the mortgage credit crisis that we have been alluding to in past articles.  While some of the proposals may be beneficial or helpful to many homeowners, any proposed government bailout for struggling homeowners will have to go through Congress and could be a significant burden on the US taxpayer.  Basically, one of the elements in Bush’s plan would allow homeowner’s with good past credit history, and were recently struggling with their mortgage payments, to refinance with a Federally Insured FHA loan to 97% of the home’s value.  Now, keep in mind that FHA loan limits, currently in Butte County are only $304,000.  So, as disused in last week’s article, an increase in that loan amount could potentially help thousands more in our area.  They are asking for easier qualification guidelines for the loans as well.  This will be an interesting story to follow in the weeks ahead. 

What Will Next Friday Show?

Friday is going to be a big day.  The Jobs Report information will be released and this report could move rates vigorously.  Remember how I have been talking about the 200-day moving average (or trend line) being a very tough level of resistance to break through?  Well, we have not been able to get mortgage bonds to move past this level.  Also, the 100 day moving average has been a level of support.  So try and follow this…the 200-day moving average has been moving downwardly and the 100-day moving average has been moving upwardly.  When bond values move up, rates move down, and vice-versa.  So, with the 100-day moving up toward the 200-day trend line…where will interest rates go?  Will the level of support move bonds up past the 200-day, or will the level of resistance bring bond values down below the 100-day moving average causing rates to increase?   We’ll see in next week’s article.  Until then…

This entry was posted on Tuesday, September 4th, 2007 at 7:02 pm and is filed under Chico Home Loans, Home Buying, Interest Rates, Loan Qualification, Weekly Market Report. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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