Tuesday, September 23, 2014 - Article by: Bart Castelli - Homestar Financial Corporation NMLS #70864 -
Mortgage rates continued to edge lower after rising as fast as it did several weeks ago. Today's improvement brings back rates where they were two weeks ago. The most prevalently-quoted conforming 30yr fixed rate for top tier scenarios remains at 4.25%, with the closing costs associated with this being the only change.
The stock market took another hit this afternoon, at one point the DJIA down another 100 points. The reaction in the rate markets was improving prices and the 10yr yield fell to 2.53% - nothing exceptional however. As we noted yesterday, we have 2.52% as a key resistance level, more declines in stocks should test that tomorrow. The only data today, another soft housing report. The July FHFA housing price index, expected up 0.4%, reported up just 0.1%; yr/yr +4.4% compared to 5.1% in June. The housing sector is not likely to add anything to the inflation talk that still rings hollow. No business has any significant pricing power - crude oil is falling and will lead to lower gasoline prices. Some may believe that low gas prices will spill into more discretionary consumer spending but we doubt that it will be significant. Eventually inflation may increase but the consensus that it is 'just around the corner' is wrong in our opinion. The absence of any inflation increase does negate one of the fears of holding fixed yield investments.
Although not much, the bond and mortgage markets continue to improve as we anticipated they would last week. Technically still slightly bearish, the 10 has critical resistance at 2.52% where the 20 and 100 da averages reside at the moment. Since geo-political safety buying is presently off the table, to drive rates down the equity markets have to lead the way. Our wider outlook is unchanged; 2.66% on the high for the 10yr and 2.45% on the low end should keep the rate market in a tight range. Currently we see little reason to expect rates to fall much unless the fear trade is resurrected, no matter how weak the stock market becomes. Stocks look soft now but with no place to go money will continue to flow in on any significant weakness.
In summary, looks like an instant replay of yesterday as we continue our steady but subdued rate improvements today. No defining catalyst, which is actually a good thing in my eyes. I'm going to stay with a floating bias for the moment provided a) you have some time to closing; b) you have some risk tolerance,; c) most importantly, you have a responsive and informed loan officer to update you on market moves as they happen!
Keep a strong look at the markets and continue to cautiously float if you do want to take a risk. Remember, if you want to know the benefits of locking your rate today versus floating, simply give me a call at 314-744-7806 or visit me on my website at www.CallTheMoneyMan.com. I have access to real time Wall St. data and instant market alerts with breaking news that I monitor throughout the day to assist us on making the informed decision.
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