Archives for September 2013

The taper that wasn’t

The Fed did not follow through with what many thought was a for sure thing.  There was no taper today.  In fact it appears there might not be a taper in 2013.  To say investors were caught by surprise is an understatement.  There was a massive rally in bonds today and provided the rally holds mortgage rates should decline from current levels.  It’s the first time in a very long time that bonds rallied in a significant way.  What was interesting about today’s announcement and the following Q&A session is the concern the Fed has for rising rates derailing the economy. Many loan officers warned that the jump in mortgage rates was going to significantly impact the market which it has.  Considering real incomes have declined (or at best flat) for the last few years  it’s hard to imagine how higher rates would not severely dampen the market.  Mortgage rates should come down over the following weeks and clearly the two most important things to watch are the inflation and job numbers.  With out 2% inflation and strong jobs numbers it appears the Fed has little to no interest in tapering.

July and August California property sales report from DataQuick

In a recent report, DataQuick claimed home sales in California were much lower in July than previously reported and August sales we’re well below the average for the month.  To those in the industry low sales were expected…..just not as early as July. Since interest rates moved up significantly in June/July (not April/May) many thought July and possibly August numbers would be solid.  Generally speaking the industry was expecting to see soft reports in September/October.  It appears interest rate increases might be causing more harm than anticipated.  We’ll have to wait to see several more months of data before one can say this for certain.

Will interest rates benefit as Summers withdraws from consideration?

In a surprise move Larry Summers has withdrawn from consideration as Chairman of the Federal Reserve.  Interest rates are a tad bit improved to start the week as Mr. Summers was seen as someone who would end QE sooner rather than later.  Until the Fed concludes it’s meeting this Wednesday it is unlikely that this will cause a dramatic change in mortgage interest rates and bond yields.   It should however assist with clarity on how the Fed will conduct business once President Obama nominates a candidate for the position.  It is widely believed the position is one of the most powerful positions in the world if not the most powerful.

Mortgage applications nationwide decline….again.

It continues….mortgage applications continue to drop as rates remain elevated and the affordability index drops.  The refinance application index is now down 70% from the spring (most likely higher in high cost states like CA and FL where refinance activity was heavy).   Purchase applications continue to drop and that trend most likely will continue as the summer buying season comes to an end.  Mortgage rates have remained somewhat stable the last few weeks (compared to June/July).   Next week the Fed meets and many are expecting the Fed to taper.  In June and July some were expecting a 10-20 billion dollar reduction however that has come down to 5-10 due to the softening of data.

Interest Rate News 9.5.2013

The 10 year treasury yield pushed up to 2.98% today with several hours left in the trading session.  Feeling the pressure of a rising yield in government bonds, Mortgage Backed Securities (MBS) have sold off and mortgage rates have moved hire.  On Friday is the monthly jobs report and it appears that bond investors are being cautious going into the report.