California Mortgage Rate Update: 03/19/12

 

 

Well, if you slept through the crash landing that was last week, don't worry, we have picked up right where we left off.  "Where is that, Rob?," you may ask.  Unfortunately, all of the lock alert and lock bias chickens came home to roost and mortgage rates pushed higher for the first time in several months.  The beating has continued this Monday, as we again see re-prices on lender rate sheets for the worse.

 

Where does this leave things and what should we expect in the week ahead?  Not much change, if you ask me.  The sentiment has changed, the stock market continues to roll forward and these things are bad for mortgage rates --- at least for now.  The market believes the Fed will be forced to take back its statement of holding rates low until 2014, and moreover, "the market" is convinced that QE3 is now off the table.  Whether you agree or disagree, there is a perception that the economy is improving.  This starts a conventional wisdom chain reaction which goes something like this: stronger economy = better job market = more people willing to spend money = more money chasing too few goods = inflation = higher rates.

 

Economic highlights for the week:  None really.  Keep an eye on the stock market and recognize that its magnitude of gain will roughly equate to magnitude of bond market loss.  Bond market loss is associated with higher rates.

   

Lock advice:  For the last few weeks I have held a LOCK position, and if you followed it, you've probably been insulated from the run up in rates.  But if you haven't, I would suggest locking here anyway.  Rates are still outstanding and if they go lower in the future, you refinance if the numbers warrant.  If they don't, believe me, you're not going to regret a 30-year fixed rate mortgage in the low-4% range once the Fat Lady has sung.  Alternatively, you could float and hope for this recent downdraft to reverse.  But beware the saying in the bond pits, "Don't try to catch a falling knife."  I do think we'll see lower rates again, but the lesson of last week should not be ignored.

 

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