First Time Homebuyer Closing Extension Almost Certain; 30-year Fixed Hits 4.58%; Unemployment Claims up - will Non-Farms Payrolls miss tomorrow? - Rate Lock Report for July 1, 2010
Happy July! I imagine many of your reading this are relieved that the deadline to close tax credit homes has passed; I hope you were successful in getting them all to the table; if not, congress finally got it together and passed an extension through both houses yesterday, so you will likely have until September 30th to close those.
New unemployment claims were unexpectedly higher today, at 472,000, further bringing into question economists predictions of 105,000 new private sector jobs in tomorrow's monthly jobs report. Economists had expected claims below 460,000. Expectations for tomorrows jobs report suggest net losses of over 100,000 jobs, principally due to temporary census jobs ending. My opinion, based on yesterday's ADP report and todays unemployment claims, is that the actual jobs number could be substantialy worse than expected. The unemployment rate is expected to decline by .1%; that figure's meaning is somewhat reduced due to the high number of discouraged workers who have given up looking for work altogether.
To the great surprise of absolutely no one in the real estate and mortgage fields, pending home sales for the month of May hit an all-time low. Pending sales represent buyers who have entered into a contract to purchase a home, and lead closed sales by 45-60 days in most cases. Why did sales drop? It was a simple question of timing - buyers who were eligible to get the $8000 tax credit moved up purchases they might otherwise have made in May (and likely June) into April. Pending sales will likely remain below average through July due to the tax credit. At that point, I feel we'll start to get a better picture of where the housing market is going without the support of the tax credit.
Mortgage rates set another new low this week at 4.58% with 0.7 points for the 30-year fixed, as a barrage of negative economic data has hit markets. In the life of the Freddie Mac Primary Mortgage Market Survey, no week has returned a lower rate; Freddie Mac has conducted this survey since 1970. The spread from the 10-year treasury to the 30-year fixed mortgage has stretched somewhat recently, reaching 1.68%; it had touched 1.09% in April after balooning to over 3% at the height of the financial crisis. The Mortgage-Treasury Spread is a measure of the relative risk
Ordinarily, I would be very apprehensive about a float recommendation going into a Non-Farms Payrolls report, however I feel that the data we have already seen this week is highly suggestive of a disappointing jobs report tomorrow. Pricing today has already improved from a slightly lower start. I do feel that it is Safe to Float today; in addition, if you do need to lock today, for example on a loan that's only a week out to close, I would suggest waiting until later in the afternoon, as I feel there is a good possibility of a reprice for the better.
Tomorrow's jobs report is every month's biggest economic report from the perspective of interest rates, so you can expect that bond traders will be hovering over their computers for the news at 8:30 AM tomorrow. Check back here tomorrow for my interpretation of that event. If you have questions regarding Rhode Island Refinance Rates, or whether or not to lock your loan, please don't hesitate to contact me by cell at (401) 263-8655, or by commenting on this post. Have a great day!
June 30, 2010 Update
Mortgage - Treasury Spread
Homebuyer Tax Credit
Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.