Rate Watch
Amazingly, mortgage rates dipped last week for the first time in five weeks. Not so amazingly, 100% of the experts at Bankrate.com and yours truly were wrong about the direction they would move. According to Freddie Mac's weekly survey, rates on the popular 30-year fixed rate mortgage were down 2 basis points to 6.26 percent. Other products were also down on the week. Rates on 15-year fixed-rate mortgages averaged 5.89 percent, down from 5.91 percent last week. One-year adjustable rate mortgages dipped to 5.32 percent, compared with 5.36 percent last week.
There are a couple of different reasons being floated for the decline in mortgage rates. First, there are growing concerns about world stability. With a failed bombing of Saudi Arabia’s largest oil terminal, growing concerns about possible civil war in Iraq, and continued uncertainty over Iran and Nigeria's respective futures, investors are less and less certain of the future course of events. When there is geopolitical uncertainty, investors will typically move their money to safer investments such as bonds and Mortgage-Backed Securities (MBS).
Second, there are many who believe that the new Fed Chairman's performance over the past month has lent more confidence to the bond market. As expected, Chairman Bernanke will continue Chairman Greenspan's fight against inflation. After a higher than expected Consumer Price Index last week, this attitude is welcome in the bond markets. If bonds were Superman, inflation would be bond's Kryptonite.
The week ahead will be exciting as always. Of course we will all be watching the news and hoping for the best for our soldiers and allies around the world. We will also be watching the economic calendar which has some of interesting goings on. New home sales will be released today and existing home sales tomorrow. These reports will be of interest to all of us in the real estate profession. I will update the blog upon their release.
Also to be released tomorrow is the first revision of 4th quarter 2005 GDP numbers. GDP is the broadest based metric of economic activity. The vast amount of data that goes into this number is so cumbersome that it takes a few months to get it all together. This report is much anticipated, it has a strong impact on mortgage rates.
After GDP and Housing, we have a couple of moderately important reports. Personal Income and the ISM index are scheduled for Wednesday. Not surprisingly, the Personal Income report provides us with some data on income. The ISM index is one of the most important manufacturing surveys out there. The Institute of Supply Chain Management surveys 400 manufacturing firms on employment, production, new orders, supplier deliveries, and inventories. Both these reports will give us some insight into the health of our economy and its prospects for the future. Any unexpected results from these reports will produce mortgage market volatility.
I hesitate to say this but I think rates will probably go up this week. If not for any of other reason, than I believe that rates will rise over the long-term. The experts surveyed by Bankrate.com are split right down the middle, so lock or not at your own risk.
posted by Vincent Biondillo @ 8:48 AM
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