Mortgage Market Review
Mortgage Markets In Review: January 26, 2008
January 26, 2009 by James K Barath, CMPS · Leave a Comment
Mortgage markets deteriorated last week on the heels of weak economic data and uninspiring corporate earnings.
Mortgage rates rose for the second week in a row. They’re now measurably higher than the low point set 3 weeks ago.
For mortgage rate shoppers, though, last week’s most important stories weren’t necessarily last week’s most reported stories; the most obvious of which was soon-to-be Treasury Secretary Tim Geithner’s assertion that China may be manipulating its currency.
This assertion poses risks to mortgage rates because China is one of the largest buyers of U.S. mortgage-backed bonds. Its ongoing bond buys helps keep mortgage rates down. But an angry China is less likely to buy U.S.-backed debt and that would pressure mortgage rates hgiher. Said China of the Geithner remarks, we’re angry.
Other mortgage rate-altering stories included:
- Corporate weakness at GE, Microsoft, and nearly every U.S. bank
- Concerns that political in-fighting could derail a stimulus plan
- Mounting job losses in nearly every economic sector
In addition, just to show how backwards markets are right now, in “ordinary” times, economic weakness often leads mortgage rates lower. In this market, however, it’s having the opposite effect. Whenever the economy looks sour, mortgage rates seem to rise.
Americans is want of a mortgage have been at the mercy of Wall Street’s fickle sentiment lately. It’s a nerve-racking place to be.
This week, markets hope to be calmed. There’s a handful of news releases including Existing Home Sales, New Home Sales and consumer confidence surveys that will help paint a clearer picture of the economy, but the Federal Reserve’s 2-day meeting should steal the spotlight. The Federal Reserve is expected to hold the Fed Funds Rate at its current range of 0.000-0.250 percent.
However, the Fed Funds Rate is somewhat of an afterthought this week. Markets are more concerned with what the Fed will be doing to loosen bank lending nationwide.
Markets will evaluate the Fed’s response and if they deem the stimulus to be too large (or too small), mortgage rates should rise. If the Fed’s moves are “just right”, look for rates to fall.
The Federal Open Market Committee adjourns at 2:15 P.M. Wednesday.
(Image courtesy: The Wall Street Journal Online)
Mortgage Market Review
Obama’s Stimulus Package Might Just Be Bad for Mortgage Markets
January 20, 2009 by James K Barath, CMPS · Leave a Comment
After a strong start Monday and Tuesday, mortgage markets suffered alongside stock markets in the latter half of last week, leaving mortgage rates higher on the week overall.
Market losses were especially steep Friday and mortgage rates headed into the long weekend on a strong uptick.
Regardless, the reasons that mortgage rates rose last week are ancient history, in most respects.
Today, the new presidential administration begins and economic expectations reset. Mortgage bond traders are now looking at Capitol Hill and wondering what the pending stimulus package will look like, and how many dollars will it include.
This is an important time for home buyers and rate shoppers, too, because stimulus is generally believed to be harmful to mortgage markets. This is for two reasons:
- Stimulus draws money to the stock market from the bond market, pressuring bond prices down and, therefore, mortgage rates up.
- Stimulus requires the “printing of money” which devalues the U.S. Dollar and everything denominated in it. This includes mortgage bonds and rates respond by rising.
In other words, as the scope of the stimulus package increases, it becomes more likely that mortgage rates will rise in 2009.
Aside from Beltway Politics and commentary, there isn’t much to impact mortgage markets this week. We’ll see the latest earnings from a handful of financial firms and tech bellwethers including Google, Microsoft and IBM. And, on Thursday, we’ll be treated to some housing data from December.
But, with expectations set so terribly low for everything economic, markets will likely shrug off any data that doesn’t scream that the recession is over. Instead, be on alert to lock a rate. In a changing political environment, mortgage rates can move quickly and it’s best to be prepared.
The rate you’re quoted in the morning won’t likely be available by the afternoon.
Mortgage Market Review
Mortgage Markets in Review: December 29, 2008
December 29, 2008 by James K Barath, CMPS · Leave a Comment
In a week defined by low volume and lack of conviction, mortgage markets idled ahead of the holiday last week. Friday’s post-holiday action was even slower.
After falling for two consecutive weeks, mortgage rates held flat last week.
It’s somewhat surprising that mortgage rates didn’t rise considering the flow of negative economic news last week:
Consumer spending sputtered.
The U.S. dollar is showing weakness.
It’s because of the relationship between mortgage rates and the strength of the U.S. Dollar.
All things equal, a strong dollar pressures mortgage rates lower whereas a weak dollar pressures mortgage rates up. And, because the dollar’s recent beat-down has been swift, it wouldn’t be unexpected to see similar mortgage market movement at any time.
This week, like last, is interrupted for the holiday. Regardless, there’s much going on. Aside from two economic reports, there is nothing else for markets to digest and no planned speeches by members of the Fed.
Expect just a small number of traders to show up for work this week. This means volume will be especially light. But don’t be lulled into taking your eyes off the market — low volume on Wall Street is sometimes accompanied by high levels of volatility.
For now, mortgage rates are hovering near their 2008-lows. Given the path of the dollar and low-volume trading, that could all change in a flash.
(Image courtesy: The Wall Street Journal)
Mortgage Market Review
Mortgage Markets in Review: December 15, 2008
December 15, 2008 by James K Barath, CMPS · Leave a Comment
Mortgage markets improved last week, riding a steady stream of negative news into its best levels of the year.So, as markets shift their attention away from fundamentals and towards the government, mortgage rates are benefiting and refinance activity is gaining steam.
This week, the government should be the top story again. On Tuesday, the Federal Open Market Committee will adjourn from its 2-day meeting and is widely expected to lower the Fed Funds Rate by a half-percent to an all-time low of 0.500 percent. This move, too, is meant to stimulate the economy.
But it won’t be what the Fed does that matters; it will be what the Fed says.
In the 2:15 P.M. press release, Fed Chairman Ben Bernanke is expected to outline measures by which the Federal Reserve will stabilize the economy. If markets consider the moves to be “enough”, stock markets should soar and mortgage rates should suffer. However, there may be specific verbiage for providing mortgage relief, in which case, mortgage rates would fall.
Other noteworthy data scheduled for this week include the Cost of Living Index and Housing Starts, but neither should matter much to mortgage rates. For now, it’s all eyes on the government.
(Image courtesy: The Wall Street Journal Online).
