Mortgage Rate Update January 26, 2011

Mortgage rates are mostly unchanged but pricing did improve from yesterday.

The markets got some good news on housing today.  The Commerce Department reported that new homes sales jumped by 17.5% nationwide in December (+72% in the West!).  Albeit, the increase was on historically low levels.  In fact, 2010 saw the fewest number of new homes sales on record dating back to 1963.  Analysts are hoping that since the year ended on a strong note the housing market has bottomed out and will begin recovering.

Stocks liked the news as the Dow Jones Industrial Average topped 12,000 for the first time in 3 years.  Good news for stocks is often bad news for mortgage rates so we’ll need to keep a close eye on the equity markets.

Later today the Treasury will auction $35 billion in 5-year notes & the Fed will deliver their monetary policy statement.  No surprises are expected from the Fed- no change to short-term rates, continued support for QE2, and cautious optimism about the economy.  Any deviation from this would like cause a reaction in the markets.

Current outlook: neutral