I think I set a record number of weeks in a row that I have been able to write this report from my office or home. I may even be able to do it again next week and that is similar to the way mortgage backed securities will likely trade going forward.
Mortgage rates did tick up slightly, basically holding steady all week before Friday’s move seemed to overwhelm the Fed (or did they just take an early holiday from buying?). Being that Friday was a shortened trading day, along with the fact options were expiring, the move was no real surprise and will likely be short lived. Speaking of shortened trading days, this week is also shortened as the market is closed today in honor of Martin Luther King. With the inauguration of president-elect Barack Obama tomorrow, this week will likely be a strange one, maybe even sending mortgage rates higher if the Fed doesn’t step up to the plate.
Speaking of the Fed, they did step up the trading a bit, but are still far short of the average pace they had announced. Maybe they are sitting on the sidelines, waiting for the market’s reaction after the inauguration, knowing they will need much more money to keep rates lower in the coming days.
As for data, we saw quite a bit last week, mostly mixed to favorable for mortgage bonds. Auctions went only slightly better than before, with yields still very low. The trade gap shrunk, which looks good up front, but brings on the fact of continued global recession. Retail Sales confirmed that consumers are still entrenching themselves in this weak economy and job market. The Beige Book and Initial Jobless Claims were only slightly worse than expected. All eyes then focused on the CPI report, which showed overall inflation at the lowest it has been in over 50 years, and even the core level moderated slightly, falling below 2.0%, keeping inflationary fears at bay. An interesting note was that M2 money supply was up $64B for the week of January 5.
As we head into this week, data plays will be marginal at best, so technical factors and news will be the driving force. Many have talked about a stock rally as Obama takes office, which could pressure mortgage backed securities as money flows into stocks. Chances are the Fed is ready to play the balancer should that happen and flood the markets as the sole buyer again. Here is this week’s schedule…
- Monday: Martin Luther King Day
- Tuesday: Fed Government Closed for Inauguration Day, 3-month Bill Auction (11:30), 6-month Bill Auction (11:30)
- Wednesday: MBA Purchase Applications (7:00), Crude Inventories (10:30), Housing Market Index (1:00), 4-week Bill Auction (1:00)
- Thursday: Initial Jobless Claims (8:30), Housing Starts (8:30), Building Permits (8:30), Money Supply (4:30)
- Friday: No data
As you can see, there are no major players and not even that many reports due out this week. As a result, as I mentioned before, news will likely be a major driving force, along with technical factors and Fed actions. My suspicions for this week are that mortgage rates will want to rise, but the Fed will likely intervene and keep them fairly steady. Technically, bonds have a little breathing room on the stochastics, and they rest on their 25-day moving average, which is the bottom support layer of the current sideways trading pattern. That means, rates will remain in that sideways pattern unless something can drive them out, such as a stock market rally.
The bottom line is, it will be an interesting week, despite the lack of data. Overall, I expect mortgage rates to remain fairly steady as a result of numerous factors.
I’m pretty curious to see how low mortgage rates will go, I wonder if 4% could be coming. That would be amazing!
Sharon Hollas – Langley Real Estate
I will be watching to see what happens with the Market this week after the election and how the rates go. You are right; it should be interesting!
Interesting week all right. And the second half of this week, or maybe by next Monday, the stock markets are probably going to zoom as sentiment goes up. But I wonder if people are expecting too much from the new Administration. Have to wait and see whether Obama can live up to the hype.
It is always essential to speak with an independent financial advisor when looking to refinance your home. This is especially true if you have Large mortgages which need to be looked at in considerable detail, especially if for consolidation purposes.
It is important to gather sound financial advice when purchasing a home, there is no doubt about that. I’ve seen so many friends be too eager to buy or sell at the wrong times, and lost money because of it.
Robert Eskiw – Homes In Edmonton
Mortgage rates are so low it’s unbelievable. 4.5 % on a 5 year fixed loan, with those kinds of numbers you can bet people will still be buying homes this year!
Ryan Philipenko – Real Estate in Edmonton
Hopefully Mortgage Rates Remain ridiculously low. It’s one of the only things preventing our fragile housing market from collapsing. If consumer confidence could turn around, and if people would quit losing jobs, the low rates could be enough stimulus to make our market normal again.
Alan Barker
Provo Utah Homes
It would be interesting to revisit this information and stats and compare them to the figures of next year
It is always essential to speak with an independent financial advisor when looking to refinance your home. This is especially true if you have Large mortgages which need to be looked at in considerable detail, especially if for consolidation purposes.