Market Update
Thursday April 21, 2011 5:15 PM ET
By John Sauro
Mortgage Rates Try to Move Lower
Mortgage Bonds moved higher at each session since last Friday. The 4 % coupon rose to $102.06, a gain of 22 basis points over the last seven sessions. Mortgage Rates, which move in the opposite direction of the price of Bonds, moved lower by about .125 percent, although this was not reflected in mortgage rates posted by most lenders. The Bond closed Thursday at resistance at the 100-Day Moving Average. It’s likely that the 4% coupon will continue to be capped at that level until a Bond friendly catalyst emerges. That may become more difficult as investors are now moving toward Gold, which moved higher to $1,509.60/oz this week, as their flight to safety instead of U.S. Bonds. The Bond Markets closed at 2pm today and are closed tomorrow in observance of Good Friday.
For those of you who have been reading my Market Updates, you have come to understand the importance technical analysis has on the direction of the markets. For those of you that are new to my Market Updates, the important thing to note when reviewing these charts is that they shoe the price of the Bond, not the rate. So, remember that the mortgage rates move in the opposite direction of the bond prices.
The chart below shows a Falling Resistance Trend line. It starts at the beginning of QE2 (The Feds Quantitative Easing Stimulus) in early November, touches the intra-day high of March 15, 2011 and rests just above the current levels. Notice how for all of 2011the trend line mirrors the 100-Day Moving Average which is also falling in tandem. Both lines are a strong layer of resistance and it will take strong Bond friendly news for Bonds to push through them. Locking into Mortgage Rates when prices trade near tough resistance is always prudent
Mortgage Bond Chart
Economic News
Existing Home sales rose 3.7% in March after a disappointing
February report, according to the National Association of Realtors. “With rising jobs and excellent affordability conditions, we project moderate improvements into 2012, but not every month will show a gain — primarily because some buyers are finding it too difficult to obtain a mortgage,” said Lawrence Yun, NAR’s chief economist, in a statement.
He said the generally upward trend in monthly existing-home sales suggests the housing market is “clearly on a recovery path.”
The Labor Department reported that Initial Jobless Claims fell in the latest week, but were above the 400,000 level as the job market continues to be problematic to the economy. The Unemployment rate stands at 8.8% and this will not improve until we see unemployment claims well below 400,000.
Standard and Poor’s cut their credit outlook on the US to negative from stable and said it’s AAA credit rating could be cut within two years if headway isn’t made in closing the budget gap. Many believe S&Ps rating is too little, too late. This is a serious issue as it would increase the interest cost on US debt and this affects us all.
Update on FINREG (Financial Regulation)
Protect your homes value and your right to affordable home financing.
This week a letter that was written on March 24th by Congressman Barney Frank to Federal Reserve Chairman Ben Bernanke surfaced, urging him to take immediate action to make changes to Fed rule 226 regarding industry compensation. http://tinyurl.com/3f3tlv4 .
So far, no action has been taken by the Federal Reserve.
The focus is now on the Dodd-Frank Bill.
With implementation of the Dodd-Frank Bill a couple of months away, much has to be done to repeal or at least modify language in the Bill.
This Bill is another government power grab and will its unintended consequences will ad further pressure to the real estate market.
Get involved and let you elected officials know your concerns.
Already prepared template letters and contact info for your Congressman and Senator are available at:
www.RepealFinreg.com .