Mortgage Rates Rally in Tandem with Stocks
Posted 11-24-2009 at 08:13 AM by VictorBurek
The prices of mortgage backed securities managed to move higher yesterday despite considerable gains with stocks. By the close of trading, MBS reached levels in price not seen since May 6th. Most lenders did reissue new rate sheets passing along better pricing. The economic data didn’t support the rally in fixed income as existing home sales posted much higher than expected numbers. The Treasury auction went fairly well with strong demand, but that is basically what was expected and in line with past auctions.
The economic calendar really picks up today with some impacting data. First report to be released is the revised reading of 3rd quarter Gross Domestic Product. GDP is the broadest measure of total economic activity covering every sector of our economy showing how much our economy grew or contracted. In other words, it is the report card for how well our economy is doing. The advanced reading, which we received last month, showed a stronger than expected reading with a 3.5% gain. This was the first positive reading since 2008! Economists’ surveyed are expecting the revised report today to show only a 2.8% growth rate. The release indicates that GDP for quarter three came in right on expectations indicating our recovery is not as strong as first thought, but we are growing. Included within this report is the GDP price index which gives us a reading on inflation. Like past reports, this also confirms that inflation is nonexistent today which should allow the FED to maintain the current monetary policy for our nation well into next year.
The S&P Case Shiller Home Price index was also released this morning. This report tracks the monthly change in values of residential real estate in 20 metropolitan regions across the country. Rising home values encourage new construction which can create jobs and more consumer spending. On the other hand, declining home values cause consumers to be more cautious with their spending, favoring an increase in their savings to offset the declining value of their home. Many economists believe that until home prices firm, it will be extremely difficult for our economy to recover from the current recession.
The data shows home prices improving more than expected. Nationwide, home prices rose for the fourth month in a row. On a year over year basis, home prices nationwide continue to improve only posting a 8.5% contraction in price. The biggest month over month gain was seen in Detroit and Minneapolis while the biggest decliner continues to be Las Vegas.
The conference board released their Consumer Confidence report which is a survey of consumer attitudes on current economic conditions and their outlook on the future. An optimistic consumer is much more likely to spend money while a pessimistic consumer is more likely to save. Since our economy is driven by consumer spending, a more optimistic consumer is better for stocks while the fixed income sector generally moves higher with more pessimism. Recent readings on consumer attitudes have shown the consumer becoming more optimistic but high unemployment is a worry. Economists surveyed are expecting this month’s report to show a slight pullback in consumer confidence to a reading of 47.0 after last month’s 47.7. The report shows that consumers continue to show optimism coming in at a better than expected 49.5. Despite the better than expected economic data on the consumer, not much reaction from the markets.
At 1pm eastern, the Department of Treasury will auction $42billion of 5 year notes. Strong demand for our nation’s debt is one of the many factors that have attributed to keeping mortgage rates at or near historic lows.
Finally, at 2pm eastern, the Federal Open Market Committee will release the minutes from its last meeting that occurred three weeks ago. Market participants will scour the minutes for any hint at future monetary policy and the Fed’s outlook for the economy.
Early reports from fellow mortgage professionals indicate rate sheets to be improved this morning. The par 30 year conventional rate mortgage has fallen to the 4.50% to 4.75% range for well qualified consumers. To secure a par interest rate you must have a FICO credit score of 740, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. If you are seeking a 15 year fixed rate, you should expect a par interest rate in the 4.125% to 4.375% range with similar costs.
Today’s rate sheets are as good as they have been for quite some time. LOCK, LOCK, LOCK!!!!
The economic calendar really picks up today with some impacting data. First report to be released is the revised reading of 3rd quarter Gross Domestic Product. GDP is the broadest measure of total economic activity covering every sector of our economy showing how much our economy grew or contracted. In other words, it is the report card for how well our economy is doing. The advanced reading, which we received last month, showed a stronger than expected reading with a 3.5% gain. This was the first positive reading since 2008! Economists’ surveyed are expecting the revised report today to show only a 2.8% growth rate. The release indicates that GDP for quarter three came in right on expectations indicating our recovery is not as strong as first thought, but we are growing. Included within this report is the GDP price index which gives us a reading on inflation. Like past reports, this also confirms that inflation is nonexistent today which should allow the FED to maintain the current monetary policy for our nation well into next year.
The S&P Case Shiller Home Price index was also released this morning. This report tracks the monthly change in values of residential real estate in 20 metropolitan regions across the country. Rising home values encourage new construction which can create jobs and more consumer spending. On the other hand, declining home values cause consumers to be more cautious with their spending, favoring an increase in their savings to offset the declining value of their home. Many economists believe that until home prices firm, it will be extremely difficult for our economy to recover from the current recession.
The data shows home prices improving more than expected. Nationwide, home prices rose for the fourth month in a row. On a year over year basis, home prices nationwide continue to improve only posting a 8.5% contraction in price. The biggest month over month gain was seen in Detroit and Minneapolis while the biggest decliner continues to be Las Vegas.
The conference board released their Consumer Confidence report which is a survey of consumer attitudes on current economic conditions and their outlook on the future. An optimistic consumer is much more likely to spend money while a pessimistic consumer is more likely to save. Since our economy is driven by consumer spending, a more optimistic consumer is better for stocks while the fixed income sector generally moves higher with more pessimism. Recent readings on consumer attitudes have shown the consumer becoming more optimistic but high unemployment is a worry. Economists surveyed are expecting this month’s report to show a slight pullback in consumer confidence to a reading of 47.0 after last month’s 47.7. The report shows that consumers continue to show optimism coming in at a better than expected 49.5. Despite the better than expected economic data on the consumer, not much reaction from the markets.
At 1pm eastern, the Department of Treasury will auction $42billion of 5 year notes. Strong demand for our nation’s debt is one of the many factors that have attributed to keeping mortgage rates at or near historic lows.
Finally, at 2pm eastern, the Federal Open Market Committee will release the minutes from its last meeting that occurred three weeks ago. Market participants will scour the minutes for any hint at future monetary policy and the Fed’s outlook for the economy.
Early reports from fellow mortgage professionals indicate rate sheets to be improved this morning. The par 30 year conventional rate mortgage has fallen to the 4.50% to 4.75% range for well qualified consumers. To secure a par interest rate you must have a FICO credit score of 740, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee. If you are seeking a 15 year fixed rate, you should expect a par interest rate in the 4.125% to 4.375% range with similar costs.
Today’s rate sheets are as good as they have been for quite some time. LOCK, LOCK, LOCK!!!!
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