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Mortgage Market Report 5/15/12: Orange County, CA

This mortgage market report will provide the data and insight from trading on Wall Street. Interest rates are derived from the yield on mortgage backed securities (bonds). When the pricing of mortgage backed securities (MBS) goes up you can expect lower interest rates. When MBS pricing goes down, expect higher pricing on interest rates for home mortgages. 

Inflation at the consumer level (PPI) was unchanged in April with the “core” index up .2%.  The headline number was better than expected while the core index was spot on.  Falling natural gas and petroleum prices did the trick.  Food prices were the drag, rising .2%.  Shipments soared to the best levels of the year and employment (manufacturing) remained solid.  On the sour side, future expectations within the index took a nose dive from 43.12 to 29.26.  NAHB Home Price Index jumped 5 points to 5 year highs.  Supply constraints (existing home inventories) in certain markets have fallen, boosting construction to help support the builders.  This is definitely the case in Orange County. My recent posts have discussed the lack of supply here.  Stocks have been all over the place this morning.  Up 80 something early only to suffer losses as the Greeks cannot agree on a government.  That will lead to an election in early June so the beat…or beating goes on.  Certain stocks have been giving traders grief such as Home Depot, expected to be great yet missed on the top line and Groupon, which was expected to be a disaster yet beat the street handily.  Headlines from CEO El-Erian (Pimco) such as “the eurozone won’t last in its current form” are weighing on stocks as well.  Current conditions however show the big board unchanged and mortgage backed securities off a tick.  10 year note is at 1.79%.  Technically the early weakness is concerning as upside (rally potential) may fade.  Just the same, with Europe in the ditch, we do not expect much more than a mild concession (pullback in rates).

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