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Providing
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 Here are the rest of the last week's comments....... PPI follows the lead of last week's CPI with highest reading in 25 years..... October 18 The Week in Review - The buzzword is Inflation.... October 9 Hold on to your Hats, rates will be going up..... October 3 Greenspan worries about "exotic" mortgage instruments..... September 26 |
PPI follows the lead of last week's CPI with highest reading in 25 years..... October 18 8:46 AM EST The PPI (producer price index) reading came in at 1.9% today, with a core reading of 0.3% and the market simply took it in stride actually improving slightly as this gain was already priced in from last week's 1/4% increase in mortgage rates. Regardless, this continued show of increases in pricing at both the consumer and the producer side carries with it the question of when, or whether, this will pass on to the pricing of goods on the shelves. Once again, the increases was due in large part to the increases in energy costs. The Core rate of the PPI, just like last week's CPI core reading, did not show any increases in many other areas other than energy prices and continues to show that inflation is well in check. As these readings continue, the question of whether the Fed should stop this assault on interest rates with their continued raises in rates comes up one more time. As we have seen so many times in the last year, the Fed members who made comments yesterday once again repeated the "company line" that indicates that the Fed has no intention of slowing down any time soon. This of course means that we will likely see another increase in November moving the Prime Rate at banks up to the 7% mark, territory that we have not seen for quite some time. The Premier mortgage lenders do not even have 7's on their rate sheets, yet. Will this actually increase the mortgage rates again, or have rates begun to hit a wall? Mor diiscussion on that later in the week. This Week's Economic Calendar This week brings us the PPI (producer price index) on Tuesday, housing starts Wednesday and the Leading Indicators for September on Thursday as the focus on the economic front shifts to the Producer side of the picture after we saw the consumer side of the equation last week. A jump in producer prices can be expected similar to the increase in the CPI that we saw last week, largely due to the increases in fuel prices we saw in September. The real focus, though, wiill be on the core reading of the PPI and whether it will stay as steady as that low 0.1% core CPI that we saw. This will tell us that those high fuel prices are not yet making their way toward reaching the shelves and the price of products to the consumer and that the Fed is doing their job in holding down inflation. Have a great day..........Scott Updated Forecasts This continuing trend of higher and higher rates has caused me to change the rate lock advisory to lock for all four stages. In addition, I have updated my forecast to show rising rates for the second half of 2005. This is a combination of what we have seen in both the market and the economic reports over the last 3 months and the continued tendencies of the market to shoot higher of very little good news. Now, on the bright side, the global economy is still going nowhere. We have quite a quandary where if the market does not rise in response to continued increases by the Fed we could see an inverted rate curve due to the global pressures. This is still a very good possibility and should we see anything close to an inversion, rates could drop quickly. The very high number of mortgages that are ARM's vs Fixed rates would switch in a heartbeat if you can get a 30 year fixed at a lower rate than a 5 year ARM!! If this fine line were to get crossed, you can throw all the forecasts of higher rates right out the window. Where are rates headed in the next 3 months? It looks like the trend will be heading steady or higher with new projections out and the higher oil prices and Fed rate increases driving rates over the next 3 months The September Fed Meeting You can read the Fed's statement on the Board of Governor's Federal Reserve website for yourself. For the 11th straight time, the Fed has increased the Federal funds rate, citing inflationary pressures from energy prices as the reasoning in raising rates one more time. The Fed did make a point of stating that in the long term, inflation was under control. Where are rates going this year? The entire first part of the year, I have been sticking with the experts position that for the year of 2005, we can expect to see mortgage rates to level out in the 6.5% to 6.75% range for a 30 year fixed rate mortgage by the end of the year. Although this forecast has been the same for the last 3 years and has yet to materialize, this long term forecast must be still taken into account. My personal expectations are that 30 year rates will be rising for the second half of 2005 barring any more terrorist attacks. If I were financing/refinancing a home . . . . I would Lock if my closing was within 10 days I would Lock if my closing was 11- 30 days away I would Lock if my closing was 31 - 45 days away I would Lock if my closing was more than 45 days away *As always, this commentary is only my personal opinion if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any/all other borrowers.
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