Mortgage rates are worse to start the week. Mortgage rates have been on an ugly track during the month of May as 30-year fixed rates have increased by .625%. This shouldn’t come as a huge surprise as I noted at the beginning of the year that mortgage rates were likely to increase during 2013. The question now is how far will rates rise before we see some stabilization.
Mortgage-backed bonds (MBS’s) and US Treasury yields are at the worst levels in over a year. For rates to have any chance of reversing course and moving lower it would require that the Fed reestablish their support for quantitative easing (QE) or an unforeseen geo-political event that created uncertainty.
The Fed is not likely to reinvigorate their support for QE given that the economy does appear to be improving. The latest reading on housing prices according to the S&P Case-Shiller index shows that home prices increased by 10.9% over the past year in the top 20 housing markets nationwide. In Portland home prices increased by 12.8%.
A strong housing market is also helping to bolster consumer confidence. A report out this morning from the Conference Board showed that consumer confidence hit the highest level since February 2008.
The economic & monetary outlook are pressuring mortgage rates higher. At some point we would expect things to cool down and stabilize but momentum is clearly not on our side so I will continue to recommend a locking bias.
Current Outlook: locking bias