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Daily Market Watch for Friday, April 20, 2018 (Courtesy of Larry Baer and Market Alert )
Short Term Trend (5 days or less): Different day -- same story. Favors steady rates and whipsaw price action in a narrow trading range.
Long Term Trend (6 days or more): Favors steady to fractionally higher rates and lower prices.
                      30 Year Fixed (National Average)
15-Minute Daily Chart of the Fannie Mae 5.0% - 30 Year from mktalert.net

 

Dow Jones Industrial Average Last 5 Days          



 
Commentary:

30-year fixed mortgage interest rates appear set to finish the week about five basis points higher than the previous week. The upward pressure on rates was created by a grudging uptick in inflation pressures on both a domestic and global economic basis. Credit market participants are all but certain the Fed will move to tighten their benchmark short-term interest rates by another 25 basis points at the end of their upcoming two-day meeting on June 13th.

In case you might be wondering, one of the short-term benchmark interest rates the Fed controls is the Fed Funds Rate. The Fed Funds Rate is the overnight rate at which depository institutions (banks) actively trade balances held at the Federal Reserve as the banks go about the daily business of maintaining their regulatory balances.

The second short-term interest rate the Fed uses to control regulatorily mandated reserve balances by banks is called the Discount Rate. The discount rate is the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank.

This is probably way more than you ever wanted to know – and the only reason I mention it – is because changes in the Fed’s short-term rates have a significant impact on the trend trajectory of long-term mortgage interest rates – but for a reason, you may not be aware of.

The reason adjustments in these overnight rates by the Fed impact the mortgage market is because mortgage investors view upward changes to the Fed's benchmark short-term rates as a signal the Fed anticipates inflation pressures to rise longer-term – which is viewed as necessitating a “tapping of the brakes” by the central bank. The broad picture here is that rising cost of capital will reduce borrowing demand and by extension slowdown economic growth.

Likewise, cuts to the Fed’s benchmark short-term rates is viewed by credit market participants as a sign inflation pressures are declining – along with economic growth – which leads to a reduction in the demand for capital and ultimately to lower long-term rates. I will be glad to discuss this concept further if you want to give me a call.

The coming week’s economic calendar will feature March Existing Home Sales on Monday followed by March New Home Sales on Tuesday. Investors will get a look at the March Durable Goods Orders report on Thursday and the week will conclude with the government’s first estimate of Q1 Gross Domestic Product and the Q1 Employment Cost Index on Friday.

Uncle Sam will be in the credit market next week as well conducting a three-day, three-part debt sale. First up on the auction block on Tuesday will be $32 billion of two-year Treasury notes followed on Wednesday by $35 billion of five-year notes. The auction series will conclude on Wednesday when the final gavel falls on $29 billion of seven-year Treasury notes.

Once again, the mortgage market will likely be most influenced by news headlines surrounding the U.S. and Russia confrontation over Syria, developments in the threatened trade war with China and the “black swan” effect of off-the-cuff tweets originating from the White House.

I continue to enthusiastically recommend you give every consideration to avoiding market risk until/unless mortgage investors prove they can push the price of the Fannie Mae 4.0% 30-year mortgage-backed security up and through 102.406 on a closing basis.
 
Commentary and Chart Courtesy of Larry Baer and Market Alert

 
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MANAGEMENT  

Jim Norris - President (RMLO #304627)
12010 Miramar Shores Dr.
Houston, TX 77065
(281) 970-1082 ext 1
(866) 717-4556 ext 1 Toll Free

jim@sweetwatermortgage.com 

Elle Roloff Norris - Operations Manager (RMLO #304630)
12010 Miramar Shores Dr.
Houston, TX 77065
(281) 970-1082 ext 2
(866) 717-4556 ext 2 Toll Free
elle@sweetwatermortgage.com

 

LOAN OFFICERS

Brenham:Gayle Valentine-Hill (RMLO #298234)
979-353-4234
Email:gayle@sweetwatermortgage.com
Brenham:Sandra Starnes (RMLO #298126)
979-251-0726
Email:sandra@sweetwatermortgage.com
Houston:Jim Norris (RMLO #304627)
12010 Miramar Shores Dr
Houston, Tx 77065
(281) 970-1082 ext 1
(866) 717-4556 ext 1
Email:jim@sweetwatermortgage.com
Houston:Ellen Roloff Norris (RMLO #304630)
12010 Miramar Shores Dr
Houston, TX 77065
281-970-1082 ext 2
866-717-4556 ext 2
Email:elle@sweetwatermortgage.com

 

 
 
  
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