Colorado Home Mortgage Loan

Colorado Home Mortgage Rates appear to be on their way down today based on what the Mortgage Backed Securities market did today.  We had a variety of economic reports released which finally moved Colorado Home Mortgage Rates down for the 1^st time in about 10 days.  Inflation continues to be the primary concern for investors and was certainly a major concern expressed by the Federal Reserve in the last week or so.  We now have all the inflationary data in for the month of May, and it appears that the Federal Reserve may have over stated the inflation problem, at least for the moment.  Colorado Home Mortgage Rates began to improve a bit after Producer Price Index figures came in line with expectations.  The Federal Reserve has expressed its concern for higher inflationary pressures, but the data so far indicates that inflation is in line with expectation no major surprises.  Colorado Home Mortgage Rates have been climbing based on the expectation that Inflation reports would come in considerably higher then the current consensus put in place.  So far it appears the investors are getting closer to what true inflation is as apposed to the Federal Reserves current expectations. 

The Federal Reserve will need to watch that it does not express too much hype in relation to the information they release, otherwise they may loose some credibility in the market.  Obviously when the Federal Reserve speaks the market listens, but this over communication policy may create market gaps for the Federal Reserve, versus desired market movement.  Allen Greenspan had a history of keeping information close by and releasing the information at times of relevancy.  Colorado Home Mortgage markets reacted very quickly when the information came out, because the information was relevant to what they intended to do.  The Federal Reserve expressed concern over the last week or so, indicating that they would take steps to combat inflation.  They went as far as insinuating that a short term interest rate hike would be needed to slow down inflationary pressures.  This type of communication in the market would have definitely lead to an interest rate hike in the next Federal Reserve meeting, however Bernanke’s approach appears for the moment, to cry wolf with no actual action.  Will this benefit his creditability in the future?  Probably not.  Colorado Home Mortgage rates have always drawn its movements from market action, and anyone trading in MBS knows that reacting first can make the difference in their portfolios bottom line.  The Federal Reserve is a tool for investors and they count on that to be accurate and predictable.  I know that we have been used to one way for a long time, and who knows, maybe Bernanke’s new approach will pay off.  So far it appears that investors are left confused and frustrated by the lack there of, in the predictability of the Federal Reserves current action plan. 

Colorado Home Mortgage rates reacted to four economic reports: PPI, Core PPI, Housing Starts, and Industrial Production.  Listed below are the actual data report figures and their impacts on the Colorado Home Mortgage Rate market.

Producer Price Index reports on inflationary pressures between business to business and typically involves overseas transactions.  These inflationary numbers will outline global inflationary pressures and pressures brought into our domestic consumer numbers.  The index showed a 1.4% increase which was a little higher then the 1.0% expert consensus which investors had hoped for.  Normally that would have created some issues for Colorado Home Mortgage Rates, however after all the fears tied around inflation, it was not the surprise everyone was preparing for.  Core Producer Price Index which takes out the highly volatile Food and Energy components actually only increased by .2% which was exactly what investors were hoping for.  This information sent a vary strong sign that inflation is still a bit higher then what investors would like to see, but not the catastrophic issue the headlines played them out to be.  Overall the news was positive for Colorado Home Mortgage Rates.

Housing Starts came in just below 1 million its lowest level since 1999.  This may be a result of the Home Builders Associations current sentiment readings released yesterday, which indicated major concern by builders on the state of the housing market.  Fear of inventory drives down inventory supplies and as a result lowers the number of home permits being issued.  Colorado Home Mortgage rates will also react positive to this as investors look for safer investment opportunities during tough economic times.  The consensus was that housing starts would be around 980K and the actual Housing Starts came in at 975K.  Not a big difference, but keep in mind housing permit activity is always higher in the summer months which make the drop even more significant.  This will be monitored by the Colorado Home Mortgage rate market, but should not make a big difference on what Colorado Home Mortgage rates will do.

Finally, Industrial Production numbers were released.  The consensus on the Industrial Production numbers was for a 0.1% advancement in production, but the actual data indicated a -0.2% drop.  This was significant and helped move Colorado Home Mortgage Rates back down.  Industrial Production numbers currently measures the change in the production of the nation’s industrial industries as well as a measure of their industrial capacity.  The level of industrial production divided by the level of industrial capacity gives the capacity utilization rate. The manufacturing sector accounts for one quarter of the economy and is weighted heavily in predicting economic growth.  Stronger economic growth typically leads to higher inflation which is bad for Colorado Home Mortgage rates.  What is hard to compare on a report like this is how much of a production increase is good.  With economic numbers coming in at zero or below it seems that anything tied to economic growth leads investors to fear inflation.  This trend seems to be more prevalent today then ever before.  Economic growth is a part of our economic evolution and some growth is needed however it appears that any growth causes Colorado Home Mortgage rates to increase out of fear. 

We have a long way to go before investors begin to react in a predictable manner, but in the mean time please call me with your Colorado Home Mortgage questions.

Daniel