Archives for August 2013

Higher mortgage rates already hurting the economy?

The July durable goods report came out today and it was bad.  It not only missed expectations but for the first time in 12 months posted it’s biggest drop.  Not a good sign for an economy barely holding on to a 1-1.5% GDP growth number.  Have mortgage rates started to hurt other areas of the economy?  Not necessarily at this point….still too early. However borrowing costs from mortgages, to US debt to corporate debt have all gone up and this great move could already be causing a slow down in other areas of the economy.  It doesn’t take more than a 1/2 of a brain to know we are barely holding on as an economy and with higher rates across the board, declining incomes and talk of “the taper” it is no surprise that we are seeing some slow down in the various data reports over the last few weeks.  The weekly jobs report this week should be interesting and if it comes in much worse than expectations then you might start to see bond investors jump back in the market.  Mortgage rates would benefit from new money entering the market.  Refinance applications may start to pick up as interest rates fall.

Mortgage Interest Rate Update 08.26.2013

The bond market opened positive today and thus we’re seeing a small improvement to mortgage rates and terms to start of the week.  Overall mortgage rates remain elevated, even compared to a few weeks ago, as the Fed determines their future asset purchases.  The non-existent refinance market remains that way and purchase applications still remain extremely weak compared to 6-10 weeks ago.   Mortgage rates will probably remain under pressure until the Fed lays out a clear plan for their reduction in bond purchases.  Mortgage lenders across the country are feeling the pain as lenders such as Wells Fargo are drastically reducing mortgage related staff.

Fed Post

The talk is heating up for who the next Fed Chairman will be.  Summers or Yellen?  Summers was the front runner however recently Yellen (who currently sits on board and is a voting member) and received more attention.  Many republican leaders are against Summers.  Yellen is a more of a bond friendly pick.  It’s difficult to say what direction mortgage rates will go under a Summers or Yellen leadership considering the current state of the economy.

Mortgage Applications

The latest survey shows mortgage applications continue to plunge. Refinance applications were down big and purchase applications were up slightly.  The report fails to consider that many of those purchase apps will not move forward with actual closed sales so the home sales data in September/October will show a much more clear picture of what is going on in the real estate market.  Rates are moving higher which means fewer buys and lower values (unless there is a dramatic turn around in net income).  Lenders have seen 60-80% drops in closed volume and that could go higher as these elevated rates remain.

Mortgage Interest Rate Update 08.21.2013

The Fed released their minutes today and no real big news.  The taper might be on….or it might not.  Fed remains “data” dependent and at this point refuses to lay out a clear plan for tapering.  The bond market continues to sell off on the lack of a clear plan and thus mortgage rates continue to rise.  Many bond investors remain on the sideline since it’s difficult to determine what the Fed will do.  Mortgage rates might continue to rise if the Fed does not lay out a clear plan in September.  The August employment report might help put a cap on that rise if the data point is soft and comes in below expectations.  Mortgage rates have pushed up since May/June and many believe are heading to 5.50% -6.00% by year end.  Others believe mortgage rates are peaking and will stay in the 4.50% -5.00% rage for a while.  Very few believe mortgage rates will return to sub 4%.  However the case can be made that the 30 plus year trend in rates was down prior to Fed intervention and thus once the Fed leaves the bond market it could resume its move down especially with a slowing economy.