Slow and Steady- Mortgage Market Update-5/23/2011

Slow and Steady- Mortgage Market Update-5/23/2011

Low rates reversing

“SLOW AND STEADY?” Last week, the economy appeared to be slowing. But despite the negative economic news, Bonds and home loan rates held steady and were unable to improve further. Economic data was worse-than-expected almost across the board, but neither FHA nor conforming mortgage rates in California budged.

Fed Exiting the Market

Instead, markets grappled with the just-released Fed Minutes which weighed heavily on investors and on Wall Street.With the release of the minutes, it’s increasingly clear that the Federal Reserve will end its support for bond markets on schedule in June, and that a Fed Fund Rate hike is possible within the next 12 months.

Not surprisingly, the date of the Fed Minutes release — Wednesday — was the singular “down day” for mortgage markets last week.

A Full Week of Data Ahead

After falling for 4 straight weeks, Bay Area mortgage rates appear to have troughed. This week they could rise, and there’s no shortage of data on which for bonds for trade.

  • Tuesday : New Home Sales; Speeches from Fed’s Plosser and Bullard
  • Wednesday : Durable Goods; FHFA Home Price Index
  • Thursday : GDP; Initial Jobless Claims
  • Friday : Core PCE; Pending Home Sales; Consumer Sentiment

The big news on that will be released on Friday in the Personal Consumption Expenditures report, which is the Fed’s favorite gauge of inflation. This report is closely watched and could move the markets, especially after the inflation concerns indicated in last week’s release of the Empire State Manufacturing Index.

There’s other forces on markets, too. First, there are 3 bond auctions — a 2-year, a 5-year, and a 7-year. Weak demand for any of the three will lead mortgage rates higher.

Volatility Will be High

And, second, this is a holiday week. Memorial Day is next Monday and, with the 3-day weekend ahead, expect large numbers of Wall Streeters to skip out on Friday (and likely part of Thursday, too). As the week concludes, therefore, bond volume will thin, amplifying mortgage rate movement — up or down.

If you’re shopping for a mortgage, it’s a good time to look at locking in. As the week progresses, mortgage rates should become less predictable and more volatile.

Have a Plan for your Mortgage

So, be ahead of the news.  With rates low the clock is always ticking and the time to start planning is now. It’s my pleasure to work for my readers and I’d be happy to help you with your Mortgage Planing, too. Message me below to get started today.

 

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