Kelli Grant Group

Berkshire Hathaway HomeServices AZ

What’s Ahead For Mortgage Rates This Week : October 1, 2012

Jobs report threatens low mortgage ratesMortgage rates dropped to another all-time low last week as concerns for global economic growth helped U.S. home buyers and refinancing households nationwide. 

U.S. mortgage rates responded to non-U.S. events and, for rate shoppers and home buyers in Phoenix , home affordability improved.

Early in the week, with Greece and Spain debating new austerity measures, and with citizen protests rampant, a flight-to-quality helped to boost demand for U.S. mortgage bonds. So did rumors of a weakening Chinese economy.

“Flight-to-quality” is a trading term for when investors shun investment risk in favor of safer, more high-quality portfolio assets. Typically, this involves selling stocks and buying bonds, including mortgage-backed ones.

When demand for mortgage-backed bonds rise, mortgage rates tend to fall.

Demand for bonds is also receiving a boost from the Federal Reserve’s latest market stimulus program — QE3.

“QE3” is a shorthand term for the Fed’s third qualitative easing, a program by which the nation’s central banker buys mortgage-backed securities on the open market in hopes of driving mortgage rates down.

So far, it’s been working. Since the Federal Reserve announced QE3 in mid-September, conforming mortgage rates have been on steady decline.

According to Freddie Mac, the average 30-year fixed rate mortgage rate slipped to 3.40% nationwide last week with an accompanying 0.6 discount points plus closing costs. The average 15-year fixed rate mortgage rate moved to 2.73%, also with 0.6 discount points and closing costs. Both rates are at all-time lows.

This week, mortgage rates have a lot of data on which to trade, and may be poised to bounce higher. 

In addition to the release of manufacturing, construction and retail sales reports, the Bureau of Labor Statistics will post its September Non-Farm Payrolls report Friday. More commonly called the “jobs report”, the monthly release takes on added significance now that the Federal Reserve has said that its open-ended QE3 program will be linked to the U.S. jobs economy.

Wall Street expects to see 120,000 net new jobs created in September. If the actual reading exceeds this figure, mortgage rates should rise.

October 1, 2012 Posted by | Mortgage Rates | , , | Leave a comment

What’s Ahead For Mortgage Rates This Week : September 24, 2012

Existing Home Sales Mortgage markets improved for the second consecutive week last week as demand for U.S. mortgage-backed bonds remained high. A series of economic reports showed strength in housing and a stability in jobs.

Wall Street looked past it, however, to send mortgage rates to their lowest levels in history.

One week into the Federal Reserve’s newest bond-buying program, the stimulus appears to be working.

According to Freddie Mac, the average 30-year fixed rate mortgage rate slipped to 3.49% last week for borrowers willing to pay an accompanying 0.6 discount points at the time of closing. Discount points are a one-time closing costs where 1 discount point is equal to one percent of your loan size.

3.49% marks a new all-time low for the 30-year fixed rate mortgage. 

The 15-year fixed rate mortgage rate fell to a new all-time low last week, too, dropping to 2.77% with the same accompanying 0.6 discount points.

Mortgage rates in Arizona fell despite strong housing data.

  • Housing Starts rose 5.5% to a 2-year high
  • Existing Home Sales rose 7.8% to a 2-year high
  • Building Permits rose 0.2%

Notably, according to the National Association of REALTORS®, the national existing home supply slipped to 6.1 months last month — very close to the 6.0-month marker which separates a “buyer’s market” from a “seller’s market”.

If supplies continue lower, home prices may rise more quickly than expected into 2013. Median home sale prices are already 9.5% higher as compared to one year ago.

This week, more housing data is set for release including the home value-tracking Case-Shiller Index and FHFA Home Price Index. Both are expected to show rising home prices as compared to the last recorded month, and one year ago. In addition, the National Association of REALTORS® releases its Pending Home Sales Index.

Lastly, and likely most important to mortgage rates and home affordability in Phoenix , the government releases its Personal Consumption Expenditures (PCE) report Friday. PCE is the Federal Reserve’s preferred inflation gauge. An unexpected increase is expected to move mortgage rates higher.

September 24, 2012 Posted by | Mortgage Rates | , , | Leave a comment

What’s Ahead For Mortgage Rates This Week : September 17, 2012

Fed Funds Rate 2006-2012Mortgage markets improved last week as the Federal Reserve introduced new economic stimulus. The move trumped bond-harming action from the Eurozone, and a series better-than-expected U.S. economic data.

The 30-year fixed rate mortgage rate dropped last week for most loan types, including for conforming, FHA and VA loans. 15-year fixed rate mortgage rates improved, as well.

Mortgage rates are back near their lowest levels of all-time.

Last week’s main event was the Federal Open Market Committee’s sixth scheduled meeting of 2012. Wall Street expected the Fed to launch a third round of quantitative easing (QE3) after its meeting and the nation’s central banker did not disappoint.

It launched QE3 and did so with such scale that even Wall Street was shocked.

The Federal Reserve announced a plan to purchase $40 billion monthly of mortgage-backed bonds indefinitely, a move aimed at lowering U.S. mortgage rates in order to stimulate the housing market which can create more jobs in construction and other related industries.

The Fed will continue to buy mortgage bonds until it deems such purchases no longer necessary. The Fed also announced a commitment to holding the Fed Funds Rate in its current target range of 0.000-0.250% until mid-2015, at least.

Mortgage rates responded favorably to the stimulus, falling to their lowest levels of the week. It masked a rise in rates from earlier in the week tied to the German court’s clearing of the European Stability Mechanism — the Eurozone “bailout fund”.

The action clears the way for debt-burdened nations including Spain and Greece to get the support necessary to remain solvent.

Mortgage rates were also pressured higher by a strong consumer confidence report. When consumers are more confident in the economy, they may be more likely to spend and consumer spending accounts for more than two-thirds of the U.S. economy.

This week, mortgage rates throughout Arizona face competing pressures. The Fed’s bond-buy has started and that will lead rates lower, but with Housing Starts and Existing Home Sales data set for release, data could pull rates up.

September 17, 2012 Posted by | mortgage-rates-whats-ahead-september-17-2012 | , , | Leave a comment

Simple Explanation Of The Federal Reserve Statement (September 13 , 2012)

Putting the FOMC statement in plain EnglishThe Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent Thursday. For the eighth consecutive meeting, the vote was nearly unanimous.

Just one FOMC member, Richmond Federal Reserve President Jeffrey Lacker, dissented in the 9-1 vote.

The Fed Funds Rate has been near zero percent since December 2008. 

In its press release, the Federal Reserve noted that the U.S. economy has been expanding “at a moderate pace” in recent months, led by growth in household spending. However, “strains in global financial markets” remain a significant threat to growth in the near-term, a remark made in reference to the Eurozone and its sovereign debt and recession issues.

The Fed’s statement also included the following economic observations :

  1. Growth in employment has been slow with unemployment elevated
  2. Inflation has been subdued, despite rising gas and oil prices
  3. Business spending on equipment and structures has slowed

In addition, the Fed addressed the housing market, stating that there have been signs of improvement, “albeit from a depressed level”.

The biggest news to come out of the FOMC meeting, though, was the launch of the Fed’s third round of quantitative easing (QE3).

QE3 is a program by which the Federal Reserve will purchase $40 billion in mortgage-backed bonds monthly, with no defined “end date” for the program. So long as the Fed believes that the market needs support, it will keep QE3 in place.

In the near-term, QE3 is good for Phoenix rate shoppers and home buyers. With the Fed in line to buy $40 billion in mortgage bonds each month, demand for bonds is expected to remain strong which, all things equal, leads mortgage rates lower.

We’re seeing this already today. Mortgage pricing is improving post-FOMC, with rates nearing their lowest levels of the week.

The Fed also used its meeting to announce that it intends to hold the Fed Funds Rate near its target range of 0.000-0.250 percent until mid-2015, at least. At its last meeting, the Fed has marked an end-date of “late-2014”.

The FOMC’s next scheduled meeting is a two-day event, October 23-24, 2012.

September 13, 2012 Posted by | Federal Reserve | , , | Leave a comment

Simple Explanation Of The Federal Reserve Statement (August 1 , 2012)

Putting the FOMC statement in plain EnglishThe Federal Open Market Committee voted to leave the Fed Funds Rate unchanged within its current target range of 0.000-0.250 percent Wednesday. The vote was nearly unanimous.

Only one FOMC member, Richmond Federal Reserve President Jeffrey Lacker, dissented in the 9-1 vote.

The Fed Funds Rate has been near zero percent since December 2008. 

In its press release, the Federal Reserve noted that the U.S. economy has “decelerated somewhat” since January. Beyond the next few quarters, though, the Fed expects growth to “remain moderate” and then gradually pick up.

There was no mention of strain in global financial markets and its threat to the U.S. economy, as the Fed had made in its last two post-meeting press releases.

The Fed’s statement also included the following observations about the economy :

  1. Household spending is “rising at a somewhat slower pace”
  2. Inflation has declined, mostly on lower oil and gas prices
  3. Unemployment rates remain “elevated”

Furthermore, the Fed addressed the housing market, stating that, despite signs of improvement, the sector overall remains “depressed”.

The biggest news to come out of the FOMC meeting, though, was that there was no news.

First, the Federal Reserve is leaving its “Operation Twist” program in place. Operation Twist sells shorter-term securities off the Federal Reserve’s balance sheet, using the proceeds to purchase longer-term securities. This move puts “downward pressure on longer-term interest rates” and makes “broader financial conditions more accommodative.”

Second, the Fed re-iterated its pledged to keep the Fed Funds Rate at “exceptionally low” levels at least through late-2014.

And, third, to Wall Street’s surprise, there was no announcement of a third round of quantitative easing, a market stimulus plan by which the Federal Reserve buys U.S. treasuries and mortgage-backed bonds on the open market. QE3 would have likely led mortgage rates lower.

The FOMC’s next scheduled meeting is a two-day event slated for September 12-13, 2012.

Mortgage markets are rising post-FOMC.

August 1, 2012 Posted by | Federal Reserve | , , | Leave a comment