In an announcement this morning the US Government said to will begin selling off the mortgage backed securities it has purchased starting in 2008 to keep rates low.   The sale of some $142 billion in securities will begin this month.  The price of mortgage backed securities fell on this news meaning rates will higher this morning.

 

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Existing and new home sales are the main focus but unlikely to show any change in the trend of weak sales that has been the situation for two years. Japan’s problems with their nuclear reactors remain but the latest reports imply some progress on a couple of reactors while  another reactor is weakening. In Libya the UN forces clobbered Libyan positions with heavy use of missiles but Qaddafi remains defiant. Treasuries and mortgage rates are likely to stay within a tight range as long as there is no change in the situations in Japan and in the Mideast.

 

Date Time (ET) Statistic For Market Expects Prior
03/21/11 10:00:00 AM Existing Home Sales Feb 5.05M 5.36M
03/22/11 10:00:00 AM FHFA Housing Price Index Jan NA -0.30%
03/23/11 10:00:00 AM New Home Sales Feb 287K 284K
03/24/11 08:30:00 AM Initial Claims 03/19/11 384K 385K
03/24/11 08:30:00 AM Durable Orders Feb 1.10% 3.20%
03/24/11 08:30:00 AM Durable Orders ex Transportation Feb 1.80% -3.00%
03/25/11 08:30:00 AM GDP – Third Estimate Q4 2.90% 2.80%
03/25/11 08:30:00 AM GDP Deflator – Third Estimate Q4 0.40% 0.40%
03/25/11 09:55:00 AM Michigan Sentiment – Final Mar 68 68.2

 

The stock market, after the strong selling on panic moves is likely to rebound and recover most of the losses on the indexes. Gold and oil prices are likely to increase after a volatile last week. Through the week as long as investors return to equity markets the bond and mortgage markets will see prices fall and yields increase. The week is very likely to be volatile from day to day with unfolding news out of Japan and the Mideast. We do not expect interest rates to increase a lot, but we also don’t see any major decline this week. Still suggest using the recent rate decline to get deals done and not get enthused about lower rates. Interest rates are not likely to fall much while the wider perspective is still bearish as the US economy improves and the ECB likely to raise rates.

 

All this volatility means Richmond area mortgage rate shoppers should consider locking this week.  Call me at 804-433-1510 to discuss locking a mortgage rate

 

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Fed Funds Rate vs 30-Year Fixed Rate MortgageMortgage markets improved again last week despite an inflation-acknowledging statement from the FOMC and stronger-than-expected jobless data.

Usually, events like this would lead mortgage rates higher, but violence in the Middle East and worsening fear for public safety in Japan took center stage instead, spurring a massive, global flight-to-quality instead.

Rate shoppers in Henrico  benefited.

As safe haven buying increased last week, conforming mortgage rates dropped, falling to their lowest levels since January. It marked the 5th straight week through which mortgage rates improved and is the longest such streak since August 2010.

This week, rates may run lower again. You may not want to gamble on it, though. Here’s why.

In general, when there’s inflation in the U.S. economy, mortgage rates rise. This is because inflation devalues mortgage bonds, the underlying security on which mortgage rates are based.

So, last Tuesday, the Federal Open Market Committee met and in its post-meeting press release, the group said inflation pressures were building, a signal that rates should rise. It then went one step further.

To keep the economy from slipping back into recession or into disinflation, the FOMC also said it plans to keep its existing monetary policies in place for the foreseeable future.  This, too, is considered inflationary — another signal that rates should rise. And they did. 

Immediately following the FOMC announcement, mortgage rates spiked. But it didn’t last.

Starting Wednesday, the battles in Libya grew more intense, and Japan battled with its own domestic crisis (i.e. a potential nuclear meltdown). The economic implications of the events spurred the purchase of “safe” assets, and mortgage bonds improved.

And this is why mortgage rates won’t stay low for long.

Eventually, Wall Street will come to terms with Libya and Japan and the flight-to-quality will reverse. Inflation, however, is not likely to lessen. At least, not anytime soon.  Therefore, this week may represent the low-point in mortgage rates for a while. It’s important to lock your low rate while you still can.

There isn’t much economic data due this week so mortgage rates will take their cues from the broader market. If you haven’t locked a rate yet, or were waiting for rates to fall, this might be your best chance. Call your loan officer as soon as possible and get a fresh rate quote today.

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Home Loan Rates Fall

Mar 18, 2011

Due to all the unfortunate crisis’ going on in the world mortgage rates are low.  These rates have not been seen since November, 2010.  The earthquake, surname and nuclear emergency in Japan, along with the uncertainty throughout the Middle East, scarce many investors, who are putting their money in the traditional safe place of the US bond markets.  With all this volatility and the outlook of rising inflation home buyers and home owners considering refinancing should consider locking a mortgage rate.

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Housing Starts (March 2009 - Feb 2011)Single-family housing starts plunged unexpectedly last month. Nationwide, starts fell 12 percent from the month prior; and 29 percent from February of last year.

February’s figures represents the worst 1-month drop in housing starts since May 2010 — the month that followed the expiration of last year’s federal home buyer tax credit — and puts single-family housing starts at a 24-month low.

In addition, single-family Building Permits plunged last month, too, shedding 9 percent from January. A building permit is a local government’s certification and approval to begin home construction.

Housing permits are an excellent forward-indicator for the housing market. This is because 93 percent of homes start construction within 60 days of permit-issuance. Fewer permits, therefore, directly reduces the number of new homes coming to market in the coming months.

For home buyers in Midlothian looking at new construction or existing homes, this news should create a sense of urgency.

Home prices are based on supply and demand and overall home supply looks headed for a fall. Plus, with mortgage rates retreating and homebuilders projecting higher sales this summer, buyers may face rising home prices before long.

Sellers look poised to regain negotiation leverage.

For now, though, home affordability remains high with properties inexpensive and mortgage rates still low, historically. If you plan to buy a home in 2011, the February 2011 Housing Starts data may be reason to move up your time frame.

With home supplies dropping, prices are likely to rise.

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NAHB Housing Market Index (April 2009-March 2011)Homebuilders are optimistic about the housing market this spring, relative to recent months.

According to the monthly Housing Market Index as published by the National Association of Homebuilders, after 4 straight months of reading 16, March homebuilder confidence ticked 1 point higher to 17.

It’s the highest confidence reading in 10 months.

A value of 50 or better indicates “favorable conditions” for home builders; with more builders viewing sales conditions as “good” than “poor”.

HMI hasn’t read higher than 50 since April 2006.

Regionally, the Housing Market Index showed mixed results. Confidence fell 1 point in the Northeast, held firm in the Midwest, and rose in the Southeast and West regions by 2 points and 4 points, respectively.

As an index, the monthly survey is actually a composite of three separate homebuilder surveys — a report on single-family sales; a report on current buyer foot traffic; and a projection for single family sales in the next 6 months.

March’s HMI breakdown shows that builders expect sales to be brisk over the next few months. Projected Single-Family Sales is running at its highest level since May 2010 — right as the $8,000 federal homebuyer tax credit was ending.

  • Single-Family Sales : 17 (Unchanged from February)
  • Buyer Foot Traffic : 12 (Unchanged from January)
  • Projected Single-Family Sales : 27 (+2 from February)

For home buyers in Henrico and across the country , the March Housing Market Index may signal the end of “builder discounts” and free upgrades. As home sales increase, builders are often less likely to make concessions.

In conjuction with rising mortgage rates and new, mandatory loan costs, buying a newly-built home may never be as inexpensive as it is right now.

If you expect to buy a newly-built home this year, consider moving up your time frame. The longer you wait, the more it may cost you.

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Putting the FOMC statement in plain EnglishToday, for the second straight meeting, the Federal Open Market Committee voted unanimously to leave the Fed Funds Rate unchanged within its target range of 0.000-0.250 percent.

The vote was 10-0.

In its press release, the FOMC noted that since its January 2011 meeting, the economic recovery “is on firmer footing”, and that the labor markets are “improving gradually”. In addition, household spending “continues to expand”. Nonetheless, the Fed said, the economy remains constrained by rising commodity prices and the “depressed” housing sector.

The FOMC statement also re-affirms the group’s plan to keep the Fed Funds Rate near zero percent “for an extended period”, and to keep its $600 billion bond market support package — more commonly called “QE2” — intact.

And, lastly, for the third straight time, the Federal Open Market Committee’s post-meeting release statement included a paragraph detailing the Federal Reserve’s dual mandate of managing inflation levels, and fostering maximum employment. Although it acknowledged inflationary pressures on the economy, the Fed said inflation remains too low for the economy currently, and that unemployment remains “elevated”. 

In time, the Fed expects both measurements to improve.

Mortgage market reaction to the FOMC has been negative since the statement’s release. Mortgage rates in Midlothian are unchanged, but poised to worsen.

The FOMC’s next scheduled meeting is a 1-day event, March 15, 2011.

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Home affordability is at record high levels as home prices are down and mortgage rates are low.  However according to a recent article experts are predicting continued apartment rental rates as vacancy rates are dropping.  Many are forecasting double digit annual rent increases.  This is a reason for rents to look at buying a home.

If you are interested in pre-qualifying for a home purchase: click here.

 

www.PaulCantor.info

 

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by | Categories: main, Purchase | No Comments

Fed Funds Rate Nov 2007 - March 2011The Federal Open Market Committee meets today in Washington D.C. The FOMC is a special group within the Federal Reserve, led by Fed Chairman Ben Bernanke, and consisting of 12 members.

The FOMC’s official schedule calls for 8 meetings annually at which it reviews the nation’s economic and financial conditions, and chooses whether to change existing monetary policy.

The group’s last rendez-vous was a 2-day affair, January 25-26, 2011.

Today’s FOMC meeting represents a bona fide risk to home buyers and rate shoppers in Midlothian and across the country. This is because when the Fed meets, Wall Street gets nervous which, in turn, causes mortgage rates to get volatile. And, as mortgage rates go, so goes home affordability. 

Rate shoppers learned this the hard way after the FOMC’s last meeting.

In January, Wall Street deemed the Fed’s status quo message too soft on the looming threat of inflation. As a result, conforming mortgage rates rose through 7 of the next 10 days, driving pricing to its worst levels of the year.

This may happen again beginning today.

At 2:15 PM ET, the FOMC will adjourn and make a press release to the markets. The Fed is expected to keep the Fed Funds Rate near its target range of 0.000 percent, and to keep its $600 billion bond buy program in place. That doesn’t mean mortgage rates will idle, however.

Depending on the verbiage of the Fed’s statement, Wall Street will make its new bets. A tough approach on inflation should push mortgage rates down; a soft approach should pressure rates up. Either way, you may want to lock your mortgage rate prior to 2:15 PM ET — just to be safe.

Once the Fed adjourns, you’re at the market’s mercy.

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Bond and equity markets face the problems coming out of Japan and the FOMC meeting on Tuesday. The economic data, while always important, is a little less so now while investors try and handicap the economic importance of the impact of Japan’s earthquakes. Two reports on inflation with PPI and CPI due out on Wednesday and Thursday, inflation continues to get attention, although many are not concerned. Weekly claims are expected to be lower on Thursday and the Philadelphia Fed index of business strength on Thursday are the two keys for data.

Date Time (ET) Statistic For Market Expects Prior
03/15/11 02:15:00 PM FOMC Rate Decision Mar 0.25% 0.25%
03/16/11 08:30:00 AM Housing Starts Feb 575K 596K
03/16/11 08:30:00 AM Building Permits Feb 573K 562K
03/16/11 08:30:00 AM PPI Feb 0.60% 0.80%
03/16/11 08:30:00 AM Core PPI Feb 0.20% 0.50%
03/16/11 10:30:00 AM Crude Inventories 03/12/11 NA 2.52M
03/17/11 08:30:00 AM Initial Claims 03/12/11 386K 397K
03/17/11 08:30:00 AM CPI Feb 0.40% 0.40%
03/17/11 08:30:00 AM Core CPI Feb 0.10% 0.20%
03/17/11 09:15:00 AM Industrial Production Feb 0.60% -0.10%
03/17/11 09:15:00 AM Capacity Utilization Feb 76.50% 76.10%
03/17/11 10:00:00 AM Leading Indicators Feb 1.00% 0.10%
03/17/11 10:00:00 AM Philadelphia Fed Mar 28.1 35.9

 

The Fed meets Tuesday, we are not looking for anything significant from the meeting. The short statement will likely be about the same as in the past; the fed stands ready to keep rates low, the job market is still struggling, the Fed will complete QE 2 but will not completely abandon a possible QE 3 although that is not likely with the economic improvement. The bond and mortgage markets are somewhat more encouraging, both the 10 yr note and mortgages have moved through their respective resistance levels. That said, rates are tied directly to stock market direction; a rally in equities will push rate prices lower and could change the dynamics overnight.

Wednesday morning the Labor Department will post February’s Producer Price Index. This important index measures inflationary pressures at the producer level of the economy. There are two portions of the index- the overall reading and the core data. The core data is more important and watched more closely because it excludes more volatile food and energy (including gasoline) prices. If the index shows a large increase, inflation concerns will rise, making long-term investments such as mortgage-related bonds less attractive to investors. This would lead to higher mortgage rates Wednesday morning. Current forecasts are calling for a 0.6% increase in the overall reading and a 0.2% increase in the core data.

Also Wednesday, February’s Housing Starts report will be posted but it will likely not have much of an impact on mortgage rates. It gives us a measurement of housing sector strength and future mortgage credit demand, but is usually considered to be of fairly low importance to the financial markets unless it shows a large variance between forecasts and actual number of new home starts. It is expected to show a decline in new starts from January to February, signaling weakness in the housing sector.

Overall, look for Thursday to be the most important day of the week due to the CPI release, but tomorrow’s FOMC meeting can also heavily influence the markets. Wednesday may also be an active day for rates with the PPI on tap. Friday will probably be the calmest day for mortgage rates, but it appears there is a good possibility of seeing plenty of movement in rates the next several days. Therefore, please proceed cautiously if still floating an interest rate.

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