Market Comment
Mortgage bond prices were higher last week, which helped mortgage interest rates improve. The Euro debt crisis dominated trading as market direction swung rapidly on news articles throughout the week. Last Tuesday, Fitch Ratings reported that French triple-A credit was safe. Spain and Italy had decent debt auctions. These events kept MBS prices in check early in the week. Fortunately, higher-than-expected jobless claims Thursday and S&P Ratings downgrade rumors for France on Friday pushed MBS prices in the right direction.

Mortgage bonds ended the week better by approximately 3/8 to 1/2 of a discount point.

European Turmoil
The newswires were full of European downgrade rumors last Friday as French news reports indicated France and four other countries would soon see their credit ratings downgraded. Spain, Portugal, and Italy were rumored to face a two-notch credit rating cut while France would lose its triple-A rating. This would likely put additional pressure on Germany, despite the fact it is expected to maintain triple-A status. The European Financial Stability Facility is a special entity created to help fight the European debt crisis. The EFSF relies heavily on France and Germany to fund the loans it provides to troubled Eurozone countries.

This news came amid earlier reports that banks holding Greek debt failed to come to an agreement on a write-down and reignited fears of a Greek default. Charles Dallara, the head of the Institute of International Finance that is representing the banks in EU negotiations, indicated “there is no agreement on any element of a deal.” Things don’t look good for Greece.



Copyright 2012. All Rights Reserved. Mortgage Market Information Services, Inc. www.ratelink.com. The information contained herein is believed to be accurate, however no representation or warranties are written or implied.

Arguably the most famous of Chicago’s South Side neighborhoods, Hyde Park is considered a prime example of urban renewal and renaissance. Originally founded as a township in the mid-1800s, Hyde Park remained independent of the city until its annexation in 1889. After a period of economic decline in the 1950s and 1960s, Hyde Park has bounced back to become a diverse community and hub of education.

Hyde Park’s introduction to the city was as the site of the Columbian Exposition in 1889. This internationally anticipated event included a number of architectural and cultural innovations, including Daniel Burnham’s “White City” and the world’s first Ferris wheel. Due to both the Exposition and the early work on the University of Chicago, the neighborhood experienced a rapid growth, more than tripling its population inside of 50 years. The University attracted several successful businessmen and noted scientists, as well as a number of noted theological schools, producing an area that today boasts the historical talents of nearly 100 Nobel Prize laureates. The University also spearheaded the project of renewing the neighborhood after the mid-20th Century decline, founding the Hyde Park-Kenwood Community Conference, whose stated goal was to create “an interracial community of high standards.” Hyde Park today reflects a significant measure of success achieving that goal, with many middle-class residents of various ethnicities sharing the neighborhood. Schools are considered of high quality, and the neighborhood artfully combines both development and green space.

In addition to its rich, diverse culture, Hyde Park is home to a handful of historic attractions. The Museum of Science and Industry, housed in the last remaining building from the Columbian Exposition, includes several noteworthy exhibits, including the captured German U-boat 505. Frank Lloyd Wright’s Robie House, which heralded the rise of the Prairie-style home, is considered a marvel of American architecture and offers tours. The Renaissance Society, Chicago’s oldest contemporary art museum, hosts not only art exhibits but also performance and film.

Market Comment
Mortgage bond prices were slightly higher last week, which kept mortgage interest rates relatively in check. We started the week with worse rates, as stocks surged higher following the extended holiday weekend and the DOW was up 225 points at pricing Tuesday morning. Fortunately, weaker-than-expected factory orders data Wednesday helped reverse the upward trend in rates and got us back near unchanged on the week. The European debt crisis continued, which generally helped US debt instruments.

The Treasury auctions this week will provide an indication of foreign appetite for US debt.

Looking Ahead

Employment Results
The December employment report came in stronger than expected, with the headline rate surprisingly lower and the jobs figure better than expected. Fortunately, stocks took a dive later Friday morning and rates were able to rebound a little later in the morning, recovering the initial weakness.

Unemployment came in at 8.5%, considerably better than the 8.7% rate that was expected and not bond friendly. The payrolls component showed jobs increased 200,000 compared to the 150,000 increase expected by analysts. The mortgage bond market had an initial negative reaction to the report.

The Bureau of Labor Statistics (BLS) of the U.S. Department of Labor compiles data from two different surveys — the household survey and the establishment survey — in order to complete the employment report. This explains why sometimes there is a divergence between the unemployment rate and payrolls figures each month. The payrolls figure usually receives the greater weight from analysts but the headline figure covers the news headlines.

Job gains occurred in transportation and warehousing, retail trade, manufacturing, health care, and mining.

Copyright 2012. All Rights Reserved. Mortgage Market Information Services, Inc. www.ratelink.com. The information contained herein is believed to be accurate, however no representation or warranties are written or implied.

Chicago’s River North area, located between Michigan and Chicago Avenues and the river on its south and west borders, has undergone several transformations in its long history near the heart of the city. For approximately a century, the area was a central hub of industry, including its attendant pollution, and was nicknamed “Smokey Hollow.” From the mid-1940s to mid-1970s, the manufacturing district gradually gave way to emptied warehouses and abandoned properties, creating an unattractive “skid row” just to the north of the bustling downtown.

In 1974, developers began making strides to transform the area into a destination for arts and culture. Low-cost space was marketed to create galleries for photography and other art, and in time it created the River North Gallery District—today, the second-highest concentration of art galleries to be found in the country, outside of the gallery districts of Manhattan. Other highlights of the neighborhood include the majestic Holy Name and St. James Cathedrals, located on the northeast side; the home and interior design shops near Merchandise Mart; and several vibrant, theme-based restaurants and nightclubs.

Housing has sprung up around this appealing, lively area, specifically in the form of condominiums in skyscrapers or mid-rise buildings. Some buildings have been rehabbed and many warehouses have been converted into upscale lofts. Single-family homes, however, are less likely to be found. The Marina City Towers, a architectural landmark famous for their “corncob” design, are also located in River North.

Market Comment
Mortgage bond prices were higher last week, which pushed mortgage interest rates lower. We started the week with some unfriendly data as the consumer confidence report was higher than expected. Fortunately, thin trading conditions amid the holidays, the shortened trading week, and jittery stocks all went well for MBS prices. Weekly jobless claims were higher than expected. Claims came in at 381k instead of the expected 375k mark.

The employment data this week will likely result in some mortgage interest rate volatility.

The Year Ahead
The future of the economy, whether recovery or additional weakness, will continue to be debated. There is no certainty in predictions. Data can be used to support both sides of the debate. What we can be certain of is the fact that mortgage interest rates are likely to remain volatile until the economy gains some stability. Historically, mortgage interest rates seem to improve slowly. In contrast, when rates increase, it is often fast and furious. One negative day often erases a week of positive improvements. Of course even that maxim was tested the last few months of last year as market swings of 1/2 a discount point both up and down were often seen in very short spans of time.

It is possible for mortgage interest rates to push lower considering the Fed still wants to keep rates relatively low. However, we are in unprecedented times and we have seen rate volatility throughout last year. The Fed isn’t the only player in the financial markets and there are many others buying and selling securities. Remember that the Fed does not directly dictate that mortgage interest rates will be at a certain rate. Rates are determined by the supply and demand for mortgage-backed securities. However, the Fed is the major player in the market at this time and they do set the lead.

Despite volatility throughout 2011, the Fed kept rates low. The big unknown is how things will play out this year. Now is a great time to take advantage of mortgage interest rates at these still historically favorable levels.

Copyright 2011. All Rights Reserved. Mortgage Market Information Services, Inc. www.ratelink.com. The information contained herein is believed to be accurate, however no representation or warranties are written or implied.