Rate Update August 4, 2009
Mortgage rates are close to unchanged from yesterday but still threaten to move higher.
The Commerce Department released the Personal Consumption Expenditure (PCE) report today. It showed that consumer prices, excluding volatile food and energy prices, fell by 1.5% last month. All in all the inflation data was tame which is a relief to the Fed. All the fiscal stimulus measures have had many analysts concerned about inflation which we know is bad for mortgage rates.
In other news, the US Treasury announced yesterday that they expect to borrow less in the 3rd-quarter than they did in the 2nd quarter. This is welcome news for mortgage rates because US treasuries compete with mortgage-backed bonds (MBS’s) for investment dollars. With less supply of fixed income securities we could see greater demand for MBS’s which would help keep yields low.
Finally, in real estate news, the National Association of Realtors announced this morning that pending home sales increased by 3.6% last month which is much higher than expectations. Yet, another sign that low mortgage rates and low housing prices are helping the housing market to reach equilibrium.
Current outlook: locking bias