Saturday July 22nd, 2011 5:15 pm ET
By John Sauro
Mortgage Rates in a Sideways Pattern
Mortgage Bonds and Rates had another week of volatility, up one day and down the next. Much of it due to the uncertainty over the Debt Ceiling talks. The upward trend line for Mortgage rates continues. With Mortgage rates still close to best ever levels many wonder “Is now is a good time to lock”? And the answer is with out a doubt …YES. Is it possible for rates to come down a little, yes.
However any improvement will be short lived, and rates have a lot more room to move higher than they do lower. See the chart below.
Chart of Fannie Mae Bond Prices – Remember, Mortgage Rates Move inversely of Bond Prices.
Economic News
Finally! A Surprising Good Report For The Housing Sector
June Housing Starts were 629,000, much better than the 570,000 expected. Building Permits were 624,000, also better than the 609,000 expected. While this is only one number and one number doesn’t make a trend…this is a good figure, and we will be watching closely for follow through in future readings. Could this be the beginning of a recovery in Housing…hopefully, this is the start of better things to come for the housing market.
Keep in mind this good news on housing will weigh on Bond prices and improvements in Mortgage Rates won’t get much lower, especially if future economic reports are better than expected.
NAHB: Homebuilder Confidence Up in July
The National Association of Home Builders reported an increasingly improved outlook for single-family homebuilders The Housing Market Index jointly released by Wells Fargo and NAHB shows a 13-point rise in homebuilder confidence, up from the three-point plunge in June. In July two of the three indexes saw strong gains, up from declines in May. The current sales conditions went up to 15 from two points, the same as in May-as sales expectations for the next six months surged by 22 points.
Double Dip for Real Estate Unlikely
In its July economic and housing market outlook report Freddie Mac said the housing sector is unlikely to see a double dip, despite uncertainty about the debt ceiling and a stubbornly high unemployment rate.
June Existing Home Sales Drop, Cancellations Up
The National Association of Realtors said sales fell 0.8 percent month over month to an annual rate of 4.77 million units, the lowest since November. May’s sales were unrevised at a 4.81 million-unit rate.
Refinances And Mortgage Applications Jump
The Mortgage Bankers Association reported a jump in mortgage applications by 15.5% for home purchases and 23.1% in refinances from the previous week. One reason for the rise in refinances may be due to borrowers opting to lock in fixed rate financing before the new conforming/jumbo loan limits decrease in September. Lenders have already begun to implement those changes.
Jobs
Initial Jobless Claims came in at 418,000 and above the 400,000 mark for the 15th consecutive week, 10,000 more than expectations. The number needs to come in below 400,000 in order to signal any meaningful improvement in the Labor Market.