Monday's bond market has opened down slightly following early stock gains. The stock markets have started the week in positive territory with the Dow up 54 points and the Nasdaq up 3 points. The bond market is currently down 2/32, which will likely keep this morning's mortgage rates at Friday's levels.
This week brings us the release of only three relevant economic reports with only one of them being considered highly important. It is a holiday shortened week with the bond market closing at 2:00 PM today and remaining closed tomorrow in observance of the Veterans Day holiday. I am not expecting this early close to impact bond trading enough to affect mortgage pricing.
The first data of the week is September's Goods and Services Trade Balance report Thursday morning. It helps us measure the size of the U.S. trade deficit, but usually is not a major influence on bond trading or mortgage pricing. It does affect the value of the U.S. dollar, which m akes U.S. securities more attractive to international investors when the dollar is strong. This is because the securities' proceeds are worth more when sold and converted to the investor's domestic currency. However, its results will not likely directly lead to changes in mortgage rates.
Overall, look for a fairly quiet week in the mortgage market compared to previous weeks unless something totally unexpected transpires. As long as the stock markets remain fairly calm, I am expecting to see mortgage rates follow suit. The two Treasury auctions that are of the most interest are Wednesday's and Thursday's since they can impact mortgage rates the most. With only one important report being posted and that doesn't come until Friday morning, I am expecting the bond market and mortgage rates to step back and take a breath per se, most likely until Friday's data.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking plac e within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
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Aaron- Thanks for this- A good deal of time has been spent talking about homeowners who are "underwater" and in need of relief ,but no one has addressed the backlog of solid potential home, and investment property buyers, priced out of the market at today's (relatively) high interest rates. Might I suggest we hold that torch for a moment and take a slightly different tack on our excess inventory? Since we the tax payers now own much of the banking industry why not offer a 6 month "FHA mortgage stimulus package" and reduce mortgage rates to a stimulus rate of 4.5%. (This is about the same rate as the market enjoyed the last time the Fed rate was at 1%.) The "stimulus rate" would be applicable to new first time home buyers and borrowers in need of refinance-relief. A borrower who can afford a $200K loan at today's par rate quoted by Chase Home Finance of 6.5%, could, applying the same payment, increase his buying power by nearly 25% to $249,500 by applying the "stimulus rate" of 4.5%.
From its inception, through much of the 1980's FHA mortgage rates were set by HUD. Why not revert to this system for the next 12 months? A substantive rate reduction would get a lot of buyers off the sidelines. (I have buyers lining up for "next spring"). It could help a lot of at-risk borrowers currently flirting with default. Lenders, currently working with borrowers already in default, would have a starting rate for negotiations. If the program when announced were limited to 6 months it would offer a "hurry-while-supplies-last" incentive and if successful slow or reverse the current downward spiral on home prices. If successful, the program could be extended at the same or higher rates as deemed necessary.
In addition (and no one is talking about this) financing for small investors has been all but non existent since the beginning of this year. Last quote I had required a 20-25% downpayment and rates were above 8%. An FHA Investor Program requiring 15 % down at a rate of perhaps 1% above stimulus rate would encourage individual capitalism (a borrower could be limited to say 2 of these loans). I have small investors who would love to step in right now, while prices are attractive, and have an investment property or two. If we do not do something about this soon we will be addressing a shortage of rental housing in the years to come.
These suggestions, if implemented, could provide affordable housing for new homeowners and increase in our rental housing supply. It could help put a floor on the current housing price declines and give many first time buyers the leg-up they need to get started in life. If this "YES WE CAN" solution still doesn't work, we can always light a torch to the excess inventory as Jim Cramer suggested, tongue in cheek, on his show Mad Money this week.
Amy Fisher, Realty Group Inc.