Today we saw that the market is still, somehow, able to stay afloat despite pessimistic estimates of its health.

The biggest two reports that came out today, Jobless Claims and the Consumer Price Index, fell short of market expectations by a fair margin. Due mostly to continuing job losses in the manufacturing, construction and education sectors, the Initial Unemployment Claims for last week rose from 460k to 472k, missing the market expectation of 450k by 5%; more importantly showing an increase in claims when a decrease was expected.

The Consumer Price Index, considered by many to be a high-impact report, missed expectations overall (-0.2% vs expected -0.1%) but met expectations on the core number, at -0.1%. Interestingly, the year-over-year increase for the overall CPI was 2.0% (core 0.9%) – matching the lowest year-over-year increases in the past 44 years.

The CPI is one of the popular numbers to point to as an indication of inflation; these numbers directly inform the Fed about rate choices.

This negative news in the markets is pushing mortgage rates back down, although for the past few weeks we have continued to see a pattern of mortgage rates staying within a certain range. Tomorrows FOMC meeting is expected to have high market impact, but other reports, like new/existing home sales, consumer sentiment and Durable Goods may prove to be more exciting.

Also, you may have heard reports that the Senate has approved an extension of the Homebuyer Tax Credit.  This is very misleading.

So, here’s the scoop via Mortgage News Daily:

” The June 30th closing deadline has not been extended…but it was accepted as an amendment to the Tax Extenders Bill. Under the amendment, borrowers who signed purchase contracts by April 30 would be given three extra months to close their transaction and still qualify for the homebuyer tax credit. The new deadline would be September 30, 2010. In a budget “point of order” vote taken this morning, the Senate actually voted against the bill that contains the homebuyer tax credit extension amendment. This forces the Senate Finance Committee to rework the overall proposal before another vote is taken.  While this may be a cause of concern for borrowers who are waiting to close their transaction, the “unanimous consent agreement” that set up the vote this morning says that any amendments accepted into the Senate Finance committee’s version of the legislation would stand, as long as the reworked bill is eventually approved by the Senate.  ”

Basically this means that the homebuyer tax credit closing deadline extension would stand if the Senate agrees on the reworked version of the proposal. This only applies to the Senate. The House would still need to reconcile on the bill.  I hope that clears up the issue a bit.

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Geoff Boyd – PrimeLending – Clackamas, OR