Rate Update August 26, 2009

Mortgage rates are ignoring economic fundamentals this morning creating a great opportunity to lock.  Rates are lower despite an economic calendar which would suggest rates should move higher.

The news this morning does not look favorable for mortgage rates:
*Durable goods orders jumped by the largest amount since July 2007 last month.  Good news for the economy is typically bad news for mortgage rates.

*New homes sales came in better than expected for the month of July according to the Commerce Department.  This is the fourth straight month that new homes sales have increased.

*The US treasury is scheduled to auction $39 billion in treasuries later this afternoon.  The additional supply could put a damper on mortgage-backed bond prices; pushing rates higher.

*The technical trading picture is not attractive for mortgage rates right now.  The last few times 30 year fixed rates have touched 5.00% they have bounced higher in the following days.

Current outlook: locking

Rate Update August 12, 2009

As we had predicted in yesterday’s ‘rate update’ mortgage rates did dip modestly by mid-morning yesterday.

Today, mortgage rates haven’t followed through on the momentum.

We’re going to take a “wait and see” approach into today’s heavy economic calendar.  Watch today’s you tube video for an explanation on what we believe will impact mortgage rates.

Here is a link to an article which explains why the Fed’s short-term interest rates don’t directly effect mortgage rates.

Current outlook: neutral

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