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 Here are the rest of the last week's comments and the days that affected rates most lately....... 9 weeks in a row with higher rates..... The week in review November 14 Time to Refinance that ARM?..... The week in review November 7 The Week in Review..... Highest Rates since 7/1/2004 October 24 PPI follows the lead of last week's CPI with highest reading in 25 years..... October 18 The Week in Review - The buzzword is Inflation.... October 9 Hold on to your Hats, rates will be going up..... October 3 Greenspan worries about "exotic" mortgage instruments..... September 26 |
November 28 11:54 AM EST Existing Homes Sales for November was released this morning showing an unexpected drop of 2.7% in exisitng home sales. The number of unsold homes on the market was also reported as the highest in 20 years! For those of us close to the industry, this was NOT a surprise. This has put a dent in the bond market and the Dow Jones as there are more than a few investors miving money into bonds for safety this morning driving the bond yield down to 4.40%, the lowest mark we have seen since the middle of October. (When bonds are purchased, mortgage rates go down) This is in line with this week's comments. Expect higher rates with a good consumer confidence report expected tomorrow. The Holiday Week behind us, a boatload of data on the way.... November 28 9:19 AM EST Heading into the first week of December, investors will be back from vacation and watching closely the many reports that will be coming in from month end. In addition, there is a Fed meeting on December 13th, where the Fed is expected to raise rates another quarter point on short term borrowing. This means that we need to keep a close eye on the possibility of rising long term rates the next week to ten days as rates rise in anticipation of a Fed increase when it comes to long term rates, NOT after the Fed makes it's move! Will the market price in another quarter point rise in long term rates? They have the last two rate hikes, but have not paid much attention to the Fed rate hikes in the 10 increases before that. In addition, the market is at the very top of the range that it has been stuck in over the last two years. There are more than a few economists out there who think that the 10 year Treasury Bond will increase over 1% in the next 12 months. On the other hand, the bonds in Europe and Asia continue to return a lower yield than US Treasury Bonds, so this will keep people buying bonds and keep the yield down. With so many differing opinions, the safest bet is to assume that rates will go up. Better safe than sorry! The question is when......... Here is a quote from Frank Nothaft, Freddie Mac vice president and chief economist in this week's mortgage rate commentary...... "This should be a quiet week as the nation officially begins the holiday season, but next week existing and new home sales figures, which are expected to be lower, will be released. Consumer Confidence for November, which is expected to be up, will also come out next week. And these figures may well influence the direction of mortgage rates over the next few weeks." Talk about not making a commitment! Slower home sales will put downward pressure on rates, but consumer confidence will put upward pressure on the rates. My View of Coming Rates Take a closer look at that statement though and you will see that the risk towards higher rates is the greatest. This is because everyone's focus this time of year is on the Holiday Sales. If those sales are good, many people are happy this time of year. Combine this with better consumer confidence and you add an eigth to the rates. Combine this again with a rate hike by the Fed and you might just add another eigth for a total of a quarter percent higher rates by the end of the year for the 15 or the 30 year fixed. The one thing that may hold down rates in the month of December is the reluctance of traders to set new highs on the Bond yield for the 10 year Treasury Bond. (10 year Treasury Bond Yields are a major factor in mortgage rates) Currently, the bond is trading lower at 4.45% after pushing through the 4.6% mark for the first time since early last spring. In order for mortgage rates to increase 1/4%, we would need to see this yield close to the 4.75% mark and I am not sure the bond can sustain this quite yet. The third force we have working on rates right now is the stock market inching towards 11,000. There are more than a few thoughts that the stock market has gone up too fast and this could mean that money would move the other way, back into bonds. Therefore rates would go lower. All in all, we could see lower rates, but the long term move should be towards higher rates. Have a great day..........Scott This Week's Economic Reports
Updated Forecasts 2006 forecasts coming the first week of December! This continuing trend of higher and higher rates has caused me to change the rate lock advisory to lock for all four stages. In addition, I have updated my forecast to show rising rates for the second half of 2005. This is a combination of what we have seen in both the market and the economic reports over the last 3 months and the continued tendencies of the market to shoot higher of very little good news. Now, on the bright side, the global economy is still going nowhere. We have quite a quandary where if the market does not rise in response to continued increases by the Fed we could see an inverted rate curve due to the global pressures. This is still a very good possibility and should we see anything close to an inversion, rates could drop quickly. The very high number of mortgages that are ARM's vs Fixed rates would switch in a heartbeat if you can get a 30 year fixed at a lower rate than a 5 year ARM!! If this fine line were to get crossed, you can throw all the forecasts of higher rates right out the window. Where are rates headed in the next 3 months? It looks like the trend will be heading steady or higher with new projections out and the higher oil prices and Fed rate increases driving rates over the next 3 months Where are rates going this year? The entire first part of the year, I have been sticking with the experts position that for the year of 2005, we can expect to see mortgage rates to level out in the 6.5% to 6.75% range for a 30 year fixed rate mortgage by the end of the year. Although this forecast has been the same for the last 3 years and has yet to materialize, this long term forecast must be still taken into account. My personal expectations are that 30 year rates will be rising for the second half of 2005 barring any more terrorist attacks. If I were financing/refinancing a home . . . . I would Lock if my closing was within 10 days I would Lock if my closing was 11- 30 days away I would Lock if my closing was 31 - 45 days away I would Lock if my closing was more than 45 days away *As always, this commentary is only my personal opinion if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of any/all other borrowers.
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