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

Rate Update July 24, 2009

Mortgage rates are unchanged from yesterday (mortgage rates moved modestly higher yesterday. See this morning’s you tube video to learn more about the cause of mortgage rates increasing and what we can laern from it.

The chart below shows mortgage rates ticking higher after hitting a low:

Rate Update July 17, 2009

Mortgage rates opened up level with yesterday but appear poised to move higher this afternoon in response to a small rally in the stock market. Signs of economic stabilization have helped stocks move into positive territory.

The Commerce Department reported this morning that housing starts in the month of June increased by 3.6% which is much higher than expectations.  With historically low interest rates & lower house prices some analysts believe that this morning’s report signals a “bottom” in the housing market.  Ironically, this news is helping to pressure mortgage rates higher in the near-term.

In another sign of stabilization Google announced today that they were beginning to see demand for advertising firm.  Their encouraging message is also supporting stocks which is hurting mortgage rates.

Not all the news is positive this morning.  Financial bellwethers Citigroup & Bank of America posted mediocre 2nd-quarter earnings.  Furthermore, CIT, which we covered in yesterday’s ‘rate update’ is still scrambling to avoid bankruptcy.

It does look like rates will be higher this afternoon so we recommend locking in at current levels.

Current Outlook: locking