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Market on the Hump - 4/29/15

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Mortgage and Lending with Mortgages in AZ, CA, CO, DE, FL, GA, IN, MD, MN, MT, NC, NJ, NV, OK, OR, PA, SC, SD, TN, TX, UT, VA, WI NMLS #138061 MMCD #1141

Market on the Hump - 4/29/15

 

 

     Happy Wednesday everyone.  Traders and the Fed alike are proving my long held beliefs that they really have no idea what they're doing in many instances, as rates have moved up over the past week in spite of some very poor economic reports. 

 

Mortgage market update

     Consumer confidence is in the tank, the GDP was riding the strugglebus throughout Q1 of this year (no surprise there, as everyone outside of Florida & California seems to just recently be thawing out).  Housing starts aren't helping inventory (again...winter wouldn't have allowed a huge jump in that number even if builders were champing at the bit to get building en masse), and though pending sales numbers are looking good, how long can that really be sustained with a limited inventory?

 

 

     So despite all of that news that usually causes nice improvements in mortgage rates, rates are up.  Some improvement in European markets has been the cause most easily pointed to, but all in all, it looks like little more than uncertainty to me.  Each time the 30 year fixed has attempted to settle in the area of 3.625%, we've seen a bounce higher to the nearly 4% mark, before another decline.  The past couple of weeks have been no different.

 

 

     As soon as the Fed statement was released today, mortgage bonds regained nearly all of their earlier losses on the day, and for good reason.  The Fed appears to know it needs to raise rates sooner than later (they can't just keep talking about it, or eventually the markets are going to act on calling their bluff), but is in a tough spot.  They believe the market is better than the numbers show - they believe inflation "is realistically" approaching a 2% target.  They believe the GDP "is realistically" in the 2-3% range.  What's funny to me, is that they want to look beyond the numbers when it suits them.  They fail to look "realistically" at the employment situation, which remains stagnant despite a lowered official unemployment rate.  Government officials using numbers to their benefit when possible, and ignoring them when they don't support their cause?  That's pretty much what we're looking at.

 

 

     It'll be interesting to see if the DOW can remain above the 18,000 mark over the next week.  It's been flirting with it for weeks now, and much like when it approached 17,000, took a while to break through.  I don't believe a stock rally is sustainable long term, but if it pushes through 18,000 convincingly, that won't be good for mortgage bonds. 

 

 

     So far as the direction for rates, like everyone else, I think they're heading up long-term.  Unlike everyone else, I think it'll take longer than anticipated.  The economy is still fragile enough that any major change that derails the housing recovery will have a major ripple effect.  Since the US has never before seen some of the recent economic measures taken to avoid disaster, one of my questions going in (back when the bailout was just being considered) was "if we go that route, what's the possible exit strategy?".  It looks like that is still an unresolved issue that they're now trying to work on, since it seems they'd like the exit to be near.

 

 

     If you've got a loan in process, it's likely your rate is still below 4%, aka near the all time historic low.  Lock it in & be happy.  I don't think there's tremendous risk in floating rates short term, but the risk still outweighs the possible reward of a lower rate, especially since once again that 3.5% 30 year fixed rate is proving to be quite a white whale.

 

 

     We'll see what the rest of the week holds, especially since there's more economic news to come.  If that news is less than stellar, we should see the market make some gains and rates should see some improvements.  If the economic news is stellar, we could see further pricing deterioration. 

 

 

 

 

Posted by

John Meussner
NMLS ID #138061

It's more than a house - it's home.  So we offer a wide range of mortgage products at competitive prices to help our clients achieve financial security at home.  While we get great feedback on our prices and products, many clients say their favorite part of working with John Meussner & MasonMac is the level of service provided along the way.

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Comments (11)

David Shamansky
US Mortgages - David Shamansky - Highlands Ranch, CO
Creative, Aggressive & 560 FICO - OK, Colorado Mtg

Yes it was an interesting day and I agree withyour earlier comment that the market was WAY oversold but if Yellen would have sneezed wrong we could have seen a 150-200bps sell off today!

Warranted - NO

Possible - YES

Thats why its wise to lock especially when leadership has no clue why take the risk

Apr 29, 2015 09:36 AM
Mark Don McInnes, Sandpoint-Idaho
Sandpoint Realty LLC - Sandpoint, ID
North Idaho Real Estate - 208-255.6227

I will bow to the professionals in this arena.  I too believe to lock now is a wise move.  Anything below 4 is an incredible rate.  To hold for an all time low when everything is just a juggling act, so it would seem, right now could cost a fortune.  Pigs get fat ... Hogs get slaughtered.  Mark

Apr 29, 2015 11:06 AM
Myrl Jeffcoat
Sacramento, CA
Greater Sacramento Realtor - Retired

What a catchy title, that grabs attention on this hallowed middle of the week day called, Wednesday!

Apr 29, 2015 11:16 AM
Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

John - thanks for you hump day update.  Lots of uncertainty is out there now.

Apr 29, 2015 11:55 AM
Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

John Meussner - I do believe that the rates are going to go up - sooner rather than later, though.

And housing recovery? We are already more than 2005 prices in many towns....

Apr 29, 2015 02:54 PM
John Meussner
Mortgages in AZ, CA, CO, DE, FL, GA, IN, MD, MN, MT, NC, NJ, NV, OK, OR, PA, SC, SD, TN, TX, UT, VA, WI - Fair Oaks, CA
#MortgageMadeEasy Fair Oaks, CA 484-680-4852

David - thank goodness she didn't sneeze.   Hopefully we'll see a small rebound now.

 

Mark - good analogy my friend, and yes, a rate below 4% is something to celebrate!

 

Myrl - thank you, glad you liked the title and stopped by for the read : )

 

Grant - we are definitely in uncharted waters with the economic recovery right now.  For better or worse, it'll be interesting to watch it play out.

 

Praful - I think interest rates will rise throughout the year, but borrowers may be able to catch another low or 2 before the trend changes permanently.  The 2nd part of your comment is what scares me. 

Apr 29, 2015 04:00 PM
Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • GRI • HAFA • PSC Calabasas CA

What do you think about PMI? A lot of my clients are still very confused with the information they hear.

Apr 29, 2015 04:37 PM
Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

Good morning John. Nice job sharing your thought about the interest rate now and going forward. I don't see strong economic news anytime soon, actually just the opposite.

Apr 29, 2015 09:00 PM
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

They can publish all of the economic news they wish and none of it will have much influence or even interest to the average consumer as long as most of the indices exclude food and fuel.

Apr 29, 2015 11:17 PM
John Meussner
Mortgages in AZ, CA, CO, DE, FL, GA, IN, MD, MN, MT, NC, NJ, NV, OK, OR, PA, SC, SD, TN, TX, UT, VA, WI - Fair Oaks, CA
#MortgageMadeEasy Fair Oaks, CA 484-680-4852

Inna Ivchenko I'm not sure what you mean regarding PMI?  Give me a call or shoot me an email, I'll help any way I can.

 

Joe - I don't either, the job numbers look good, but there's been a lot of negative news, too.

 

Lenn - the reports definitely don't tell the whole story.  Feds seem to want to use certain numbers to their advantage and ignore the ones that don't suit their plan.

Apr 30, 2015 01:45 AM
Debbie Reynolds, C21 Platinum Properties
Platinum Properties- (931)771-9070 - Clarksville, TN
The Dedicated Clarksville TN Realtor-(931)320-6730

Up and down is how it goes. We have seen this the last coupel of years with no significant movement to scare people into buying now. What will it take?

Apr 30, 2015 11:40 PM