Brentwood TN Real Estate
Mortgage bond prices rose last week pushing mortgage interest rates lower. Trading was volatile with most of the positive improvements coming early in the week. The anticipated Fed rate cut and mixed economic data sent bonds up and down the latter portion of the week. Unemployment was stronger than expected @ 4.9%, however payrolls fell 17,000. Stocks continued to bounce back posting additional gains following the Fed 50 basis point rate cut. Unfortunately this caused the demand for mortgage bonds to languish. The good news is that despite the weaker demand the latter portion of the week, for the week, interest rates on government and conventional loans fell by about 3/8 of a discount point. This is good news for Brentwood TN Real Estate buyers.
The productivity data Wednesday will be the most important event this week. Factory orders and the Treasury auctions also have the real potential to cause mortgage interest rate volatility.
Economic Indicator Release Date Time Consensus Estimate Analysis
Factory Orders Monday, Feb. 4, 2008 Up 2.0% Important. A measure of manufacturing sector strength. Weakness may lead to lower rates.
Preliminary Q4 Productivity Wednesday, Feb. 6, 2008 Up 1.0% Important. A measure of output per hour. Improvement may lead to lower mortgage rates.
10-year Treasury Note Auction Wednesday, Feb. 6, 2008 None Important. Notes will be auctioned. Strong demand may lead to lower mortgage rates.
30-year Treasury Bond Auction Thursday, Feb. 7, 2008 None Important. Bonds will be auctioned. Strong demand may lead to lower mortgage rates.
Consumer Credit Thursday, Feb. 7, 2008 Up $8 billion Low importance. A significantly larger than expected increase may lead to lower mortgage interest rates.
Despite continued Fed rate decreases, the future of the US economy remains uncertain. The Fed is desperately trying to jumpstart the economy amid high commodities prices and the fear of inflation. Former Fed chairman Greenspan indicated last week that the Fed's actions probably wouldn't keep the economy out of recession. Usually economic weakness is good for bonds and bad for stocks. Unfortunately the bond market has been hit hard recently by huge losses from bond insurers and many investors fear the worst is yet to come.
Keep in mind that a Fed rate cut does not automatically mean mortgage interest rates will improve, as was evident following the last few Fed rate cuts. The Federal Reserve has direct control over the level of short-term interest rates. The Fed's influence over longer-term interest rates is less certain. Former Fed chairman Greenspan hit upon this fact last week when he noted, "central banks have less and less power to influence long term rates." Remember that the Fed cuts rates to help spur the economy. Usually funds exit bond holdings and enter stocks. This was exactly what happened over the past two weeks. Bonds fell pushing rates higher following the Fed rate cuts, while stocks showed strong gains.
The good news is that interest rates still remain very favorable. There is a very real possibility that longer-term mortgage interest rates could head lower if inflation fears subside and the economic weakness continues. However, lower rates are not a given. High commodities prices and liquidity concerns in the mortgage industry continue to weigh heavily upon the economy. Couple those concerns with reports of continued housing price declines and the short-term economic outlook looks dim.
Mortgage interest rates remain historically favorable and taking advantage of rates at these levels to lock in a low interest rate for years to come would be prudent.
* Information courtesy Tonya Esquibel, WR Starkey, Franklin TN*