October summary report

November 1, 2013

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Mortgage Activity
According to the latest Mortgage Application Survey by the Mortgage Bankers Association, refinance activity rose 6.4 percent in the week ending on Oct. 25. The increase represents the return of applications to levels last seen earlier this summer, when mortgage rates were at their lowest. Applications for a new home purchase increased slightly in the report.

With mortgage rates currently holding steady around 4 percent, homeowners are attempting to secure the best mortgage refinance rates while they are still available.

The previous week's mortgage application survey revealed that activity had dipped slightly by 0.6 percent. The 16-day government shutdown may have influenced mortgage applications during that week, as consumer confidence was down. Mortgage rates rose minimally during the shutdown, deferring borrowers to apply for refinance loans.

Federal Reserve October decision
In its first meeting since the government was shut down, Federal Reserve officials discussed options for reducing the monthly bond-purchasing rate of $85 billion before announcing  the current spending rate would be maintained. The Fed spending has artificially kept mortgage rates historically low, encouraging more borrowers to refinance or become first-time home buyers.

As the Federal Reserve wrapped up its October meeting, the stock market fluctuated just before the central bank made its announcement. Most economists believed the Fed would continue its current monthly rate of bond-purchasing at $85 billion, keeping confidence in the market high.

"Markets are up because investors anticipate a status quo in the Fed's quantitative-easing program," Jacques Porta, a fund manager at Ofi Gestion Privee in Paris, told Bloomberg. "The recent data confirm a weak U.S. economy and the shutdown is not going to help. This will force the Fed to delay tapering stimulus until next year."

Before the central bank's October decision to delay tapering its stimulus efforts, a survey by Bloomberg predicted spending wouldn't be reduced until March 2014.

Consumer confidence picks up
During the government shutdown, consumer confidence declined in the uncertainty the country would default on its debt. However, since Congress reopened and rates dropped again, more Americans appear to continue spending and are becoming more confident in the economy. According to the Department of Labor, the Consumer Price Index rose 0.2 percentwhen seasonally adjusted.

Inflation rates were relatively flat, further convincing economists the Federal Reserve would continue its bond-purchasing rate.

October job estimates
The government shutdown affected confidence beyond consumers, reaching employers. In the face of the government shutdown, uncertainty in the stock market led many employers to hold off hiring until the government reopened and passed a budget plan. While Congress did manage to pass a budget deal just in time to avoid defaulting on the nation's debt, the terms are short, expiring Jan. 15. Lawmakers will once again have to pass a debt deal early next year.

"The reading was light with blame likely falling at the door of Washington politicking," Andrew Wilkinson, Miller Tabak's chief economic strategist, told CNBC. "The government shutdown amidst budget negotiations prompted companies to await the outcome before making commitments to new workers."

The impact of the shutdown is expected to affect the October employment report, which will be released in early November.