We will continue to recommend a short term locking into Mortgage Rates headed into the holiday shortened week. Mortgage Bonds traded in a tight range today and
finished marginally higher, which kept Mortgage Rates steady. The benchmark 3% coupon settled at 102.84 up 6bp in quiet trading. Stocks rose on
news that Cyprus will most likely reach a bailout from the European Union. The Dow gained 90.54 points to 14,512.03, the Nasdaq rose by 11.09 points to 3,245.00 while the closely watched S&P was up 11.09 points to end at 1,556.89. Oil was last seen at $93.80/barrel up $1.35.
Timing is Everything. Many try to time locking into a Mortgage Rate only to find out how frustrating it can be. We have many resources in the financial markets that keep us informed and give us ample warning as to movements in Mortgage Rates. This helps us to know when rates are moving higher or lower, before lender’s re price. This information has been critical in helping our clients obtain a low interest rate.
The chart below shows Bond Prices remain in a stubborn longer term down trend. Hence, Mortgage Rates are in a stubborn longer term up trend. As Bond Prices pull back from the ceiling, you need to consider short term locking into Mortgage Rates. If support is breached at the $102 level for the benchmark 3% coupon,Bond Prices could continue to move lower and Mortgage Rates higher.
Bernanke: Fed Worries About Tight Lending Standards
The Federal Reserve worries the tightening of mortgage credit has gone too far and is now working on policies to ease lending fears, Fed Chairman Ben Bernanke said Wednesday. After the Federal Open Market Committee verified its continued commitment to aquiring mortgage-backed securities and Treasuries at the same pace, Bernanke told reporters the Fed is seeing “much higher credit-quality requirements” from potential borrowers.
Yet, he worries any concerns over “put-backs that banks may have — and uncertainties about regulation — have tightened the mortgage credit box more than desirable.” Still, the Fed Chair said one of the key tools in combating tight lending is the lowering of mortgage rates by keeping the Fed’s federal funds rate near zero. “I would say one thing is that as the housing industry has strengthened and home prices have gone up, that has brought some people into the credit box,” Bernanke said. As people build more equity or pull themselves above water, they become more creditworthy and increase their options, Bernanke suggested.
MBA CEO Predicts 4% Mortgage Rates by Year-End
David Stevens, President and CEO of Mortgage Bankers Association, said the purchase market could easily withstand a 4% mortgage rate, which is expected to hit by the end of the year. Stevens was interviewed for CNBC Squawk Box Friday morning to discuss the upcoming spring housing market. “As we head into the spring home buying and selling season, the housing comeback is showing signs of accelerating more rapidly than most anybody had thought at this point,” Stevens said. He added, “The peak housing era of 2005 through 2007, those couple years produced some very dangerous characteristics we can’t allow to ever come back. But the market is clearly improving [now] and could weather rising interest rates should the Federal Reserve start tightening at some point.”
Housing News
The National Association of Home Builders Housing Market Index comes in at 44, below the 47 expected and the lowest since October.
JPMorgan Chase expects home prices to rise 7% in 2013 as investors continue to take interest in nonperforming loans and distressed properties. The forecast for 2013 is more optimistic than initially expected. Although most investors still believe home prices will increase by less than 5%, some investors expect home price growth to increase as much as 15%, according to JPMorgan’s February investor survey. “As we pointed out in our 2013 outlook, the distressed sale discount should continue to decline. Indeed, the quantitative easing program has not done much for mortgage rates, but the resulting reach for yield is now firmly grounded in the housing market,” the company said.
Housing Starts rose slightly in February to 917K, above the 911K expected and are up 28% since last year this time. Single family starts rose to 618K units, the highest level since June of 2008 while Building permits, a sign of future construction, jumped 4.6% to 946K, also the highest level since June of 2008. Housing continues to improve.
Existing Home Sales rose by 0.8% in February from January to 4.98 million units, just below the 5 million expected.
Economic News
So far in 2013, the Fed has bought up more U.S. government debt than the U.S. Treasury has issued.
Sources: CNBC, Bloomberg, MMG, Housingwire