Home Loan Rates have moved lower again as Bond Prices are about half way back to their best levels seen in April of this year. Much of the recent Fed speak, some of which is noted in this article, has been responsible for the market improvement, which is a complete reversal of the Fed’s comments earlier in the summer that roiled the Bond market and pushed Home Loan Interest Rates higher. Mortgage Bonds continued to drift higher Friday aided by a decline in Stock prices as the threat of a government shutdown looms. The Bond rose by 25bp to end the session at 104.81; another good day for Interest Rates. Stocks ended lower – the Dow ended at 15,258.24 down 70.06, the S&P lost 6.92 points at 1,691.75 down 6.92 points while the Nasdaq dropped 5.83 points to 3,781.59. Oil was last seen at $102.78/barrel down 25 cents.
Wait for Rates to move Lower or Lock in Now
I have lived through this many times and while it’s human nature to want to catch the bottom, some have kicked themselves for holding out. I think it will take a lot more “Easing” talk from the Fed, a poor Jobs Report and poor reports for other leading economic indicators to move Bond Prices back to levels seen on April 30th of this year. Hence, the “Bird in the Hand” logic. What would you do? Lets say you can save $300 dollars per month based on where rates are now, but can save an extra $50 per month if you wait and rates move lower. Would you wait? This has been a fast moving volatile market and betting $300 to save an extra $50 is not a bet I would make. Not with the current market conditions.
Technically, the rise in Mortgage Bonds has stalled a bit. We are still floating, but ever so more cautiously. So, have your home loan application in process and be ready to lock into a rate at a moments notice.
Rates Improve in Latest Freddie Mac Survey
Freddie Mac reported in their Weekly Survey for the week ending September 26th, that the average contract interest rate for conforming 30-year fixed-rate mortgages decreased to 4.32 percent from 4.50 percent, with points 0.70 respectively for 80 percent loan-to-value ratio (LTV) loans.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.37 percent from 3.54 percent, with points of 0.70 respectively for 80 percent LTV loans.
Fed’s Dudley: Two key tapering tests not yet met
The Federal Reserve still needs to push hard against threats to the U.S. economic recovery, and fiscal uncertainties in particular “loom very large right now,” an influential Fed policymaker said on Monday.
New York Fed President William Dudley defended the U.S. central bank’s shock decision last week not to trim its aggressive bond-buying, arguing in a speech that any changes to the quantitative easing program mush be based on the most recent measures of economic health. Read more
More Good News for Mortgage Rates
Home Loan rates got a little more help on Thursday when Narayana Kocherlakota, head of the Minneapolis Federal Reserve Bank said the U.S. central bank needs to take a far more aggressive approach to lowering high levels of unemployment in a situation that has strong parallels with the radical action the Fed took to break the back of high inflation a generation ago. Read more
As per the most recent Kiplinger Letter- Look for long-term interest rates to climb back from this week’s dip following the Federal Reserve’s announcement that it’s not prepared to start tapering off bond buying. Once the sugar high wears off, financial markets will realize that not much has changed: The Fed will start slowly reducing its support, though probably not earlier than Dec., and only if the economy shows more strength.
Meanwhile, a small lift for housing activity, which has zigzagged this year…rising swiftly in spring, then slowing sharply in summer. With housing a rare pillar of growth in this economy, the Fed wants to make sure the upward trend continues.
Housing News
New Home Sales Rise in August
Sales of new U.S. single-family homes rose by a seasonally adjusted annual rate of 421,000 units in August. Economists polled by Reuters were expecting new home sales to rise by 423,000 from 394,000 the month before. Read more
Pending Home Sales Fall 1.6% in August
U.S. home buyers signed fewer contracts to purchase existing homes in August, as higher mortgage rates and higher home prices weighed on housing affordability. So-called pending home sales fell 1.6 percent month-to-month, according to the National Association of Realtors, but are still 5.8 percent higher from a year
ago. Read more
Are we in a Housing Bubble? Not Even Close, experts say
While some borrowers might pull out of the housing market at the sight of the the slowdown in home prices, market experts are cautioning consumers not to slam on the housing brakes just yet. Home prices only increased from June to July by 0.6%, Lender Processing Services revealed Monday in its U.S. Home Price Index. However, from last year, July prices soared 8.7% above 2012 levels, the company said. Read more
Fact 45% of residential home sales in August were all cash.
Economic News
Durable Orders rise by 0.1% in August, below the 0.5% expected. July revised to -8.1% from -7.4%.
Jobless Claims Hit a Six-Year Trough as U.S. Growth Pushes Along
The number of Americans filing new claims for jobless benefits fell last week to a near six-year low, a promising sign for the labor market. Separately, the U.S. government left its estimate for economic growth in the second quarter unchanged, but said prices for goods and services purchased by U.S. households fell for the first time in four years. Initial claims for state unemployment benefits dropped 5,000 to a seasonally adjusted 305,000, the Labor Department said on Thursday. Read more
U.S. personal income increased by 0.4 percent in August, while consumer spending came in at 0.3 percent. Economists had expected personal income to rise by 0.4 percent, from the prior reading of 0.1 percent. Consumer spending was forecast at 0.3 percent, up from 0.1 percent in the previous month. The personal savings rate climbed to 4.6% from 4.5%.
Inflation remained tame as measured by the Core PCE coming in at 0.1% last month while the year-over-year PCE was unchanged at 1.2%, well below the Fed upper target of 2%. The low inflation and weak labor market gives the Fed cover to keep printing money.
Consumer Sentiment was reported to be inline at 77.5 for the final reading in September.
Sources: Housingwire, CNBC, Bloomberg, MMG, Wall Street Journal