Houston's Rate Sheet

Rate Watch

It has been a wild and crazy month. March has proved to be one of the more volatile months for mortgage rates in a long time. And last week was no exception. After soaring rates for 2 straight weeks, we got a little relief. Freddie Mac's weekly average dropped 3 basis points to 6.34 percent on the benchmark 30-year Fixed Rate Mortgage (FRM). Other programs dropped as well. The average for the 15-year FRM was at 5.98 percent, down from the previous week’s average of 6.00 percent. The One-year Treasury-indexed ARM averaged 5.37 percent last week, down from the previous week's 5.45 percent.

Rates have shifted direction primarily due to better attitudes regarding inflation. Lower rates came courtesy of February's Consumer Price Index or CPI, which was released last week. CPI came in lower than market expectations, rising just 0.1%. Its counterpart "core" CPI, which excludes more volatile food and energy prices, also came in below the forecasts at 0.1%. These results brought much needed good cheer with respect to inflation and the possibility for future Fed rate hikes. For the past couple of weeks, analysts have been working under the assumption that the Fed will raise rates at least 3 more times and there by bring the Federal Funds Rate up to 5.25%. Now Wall Street is leaning more towards a Fed Funds rate high of 4.75% or 5.00%. Considering, the Fed has raised rates in 16 consecutive sessions of the Federal Open Markets Committee (FOMC), this would be a welcome relief. Most of the time, mortgage rates and the Fed Funds rate move in the same direction.

This week's economic calendar is pretty bare. The biggest news of the week will probably come on Tuesday with the release of the Producer Price Index (PPI). While the CPI is a measure of prices on the finished goods that you might buy at the store, PPI measures the price of materials used by manufacturers to make finished goods. If PPI reflects moderate inflation numbers similar to last week's CPI, then we could see additional declines in mortgage rates.

Existing Home Sales and New Home Sales will be released on Thursday and Friday respectively. Although, they won't have much of an impact on rates, they will be of interest to real estate professionals. If buyers are starting to hold-off due to rising rates, the Home Sales reports should give us some insight.

Finally, the Durable Orders report will allow us some insight into the economic health of corporate economics. That report is scheduled for release on Friday.

This week’s panel of experts at Bankrate.com are split in their rate forecasts. Half of the panelists believe rates will rise in the next 35 to 45 days, while the other half believes rates will either stagnate or fall. Sense there is so much uncertainty in the market right now, it would probably be best for borrowers to lock rates as soon as possible.

posted by Vincent Biondillo @ 11:19 AM