Mortgage Bonds were able to close above the 25-day Moving Average for two consecutive weeks – good sign for Mortgage Rates. However, Bond Prices still remain beneath the Falling Trend Line for Bond Prices. In order for Mortgage rates to fall, Bond prices need to close above the falling Trend Line.
Bond Prices rose by 9bp to end the session at 100.88, and above resistance at the 25-day Moving Average for the second straight week. Stocks ended just slightly positive, after spending the majority of the day in the red. The Dow closed up 3.22 points to 15,558.83, the S&P 500 Index was up 1.40 points to 1,691.65 while the Nasdaq added 7.98 points to end the week at 3,613.16. Oil was last seen at $104.49/barrel down $1.00.
Looking ahead, next week will start off slow with just a few economic releases on Monday and Tuesday. But – things really heat up come “hump day, as it will be Fed Day along with GDP and the ADP Report. Then next Friday we receive the all-important Jobs Report. Next week will likely determine whether the Fed starts tapering QE Unlimited in September. If the numbers are soft – which we expect, we may just see QE3 roll on as is.
No matter what happens next week, we see the selling in Mortgage Bonds overcooked with prices ripe for a recovery. Maybe next week will set the stage for an August Bond rally like we have seen each of the last two years. So the advise for now, is to Float and Not Lock Mortgage Rates at this time.
Government Regulations to Require 20% Down to Buy a Home
The recent Kiplinger Letter wrote – The initial proposal, requiring borrowers to make a 20% down payment or banks to take the first 5% of loss on a securitized mortgage that winds up going bad, is under fire. Opponents say too many middle-class borrowers can’t muster 20% and banks can’t afford to risk a 5% loss, so the reg would severely crimp home buying. The feds will back down a bit in the end. By mid-2014…a lower threshold for down payments and maybe less risk for banks that lend outside that parameter.
Housing News
Economic News
U.S. consumer sentiment rose in July to the highest level in six years as Americans felt better about the current economic climate, though they expected to see a slower rate of growth in the year ahead, a survey released on Friday showed. Read more
Weekly claims for state unemployment benefits totaled 343,000, versus the previous week’s total of 334,000. Economists polled by Thomson Reuters had expected 340,000 claims. In a separate report, orders for long-lasting goods were up 4.2%. Economists polled by Reuters had expected an increase of just 1.7%.
Durable Orders had an upside surprise surging by 4.2% in June, well above the 1.8% expected. The Durables news has pushed Bonds into the red.
Sources: CNBC, Bloomberg, Kiplinger, MMG, Housingwire