Interest rates are currently 4.875% with .75 points or 5.125% with no points for a conforming 30 year fixed rate (These rates assume 20% down for detached homes or 25% down for attached homes, primary or secondary residence, excellent credit, 30 day lock, and impounds of taxes and insurance).
We may be in the early stages of the turnaround from falling to rising interest rates. On the other hand, the Fed may continue somehow to make sure that rates stay near their current levels. It is, in any case, plain to nearly everyone that rates would rise now if left to their own devices, and that upward pressure may be starting to assert itself.
Higher rates may slow the real estate market. Indeed, the slowing may have already begun. However, slight rises among interest rates may also help to convince investors that the recovery is becoming more certain, since higher rates are an inevitably accompaniment to recovery.
Still, there is much uncertainty in the air. It is still time to remain cautious and conservative, I suspect.
Steve Peterson
Branch Manager
Sierra Pacific Mortgage
Office: 888-232-7687
Cell: 775-219-7151
October 28, 2009
KEY INDICATORS
Gold $1038.90/ounce [down]
Crude Oil (Brent) $77.52/brl [up]
U.S. Dollar to…
Euro .6744 [up]
Japanese Yen 92.08 [up]
6-mo Treasury Bill Yield 0.17%
10-yr Treasury Note Yield 3.51%
[6-mo up 1 bp, 10-yr up 17 bps]
11th Dist Cost of Funds 1.412%[-]
30-yr Fixed-rate Mortgage 5.47%
15-yr Fixed-rate Mortgage 4.92%
1-yr ARM 4.73%
[HSH averages rates: 30-yr
up 6 bps,15-yr up 8 bps; 1-yr ARM up 12 bps]
Mortgage Bankers Association Mortgage Applications Index
week ending 10/16
Overall
641.0 (down 13.7%; down 1.8%
the week prior)
Purchase Money Loans
268.8 (down 7.6%; down 5%
the week prior)
Refinancing Loans
2808.0 (down 16.8%; down
0.1%; the week prior)
Jobless Claims 10/17
531,000 – prior week 514,000 – continuing claims fell to 5.923 m
Conference Board Index of Leading Indicators Sept
Up 1%
Existing Home Sales Sept
Up a surprising 9.4%
Conference Board Consumer Confidence Index Oct
Down to 47.7 from 53.4
Weekly Commentary
“Slow gains in consumer confidence do not mean the recovery is in doubt. The Conference Board’s leading indicators index rose again in October, supporting our view that the recovery is now taking hold. The improvement was broad-based—eight out of 10 components grew over the month—and the coincident indicator held its ground.” [Sara Kline, Moody’s Economy.com]
It is, indeed, a confusing time. The dollar is down and, just recently, the yield on Treasury securities has risen. Stocks, meanwhile, are a bit shaky. You could even call it a correction, though mild (and possibly brief). Even oil has edged down a bit and, according to Mark Gongloff’s article in The Wall Street Journal on Tuesday, we may see the price of crude fall still further in the coming months.
What’s this all about? As noted in last week’s update, the market has been making little noises about recent excesses—from the run-up in the returns on junk bonds to the continuing growth of foreign central bank purchases of Treasury securities. In truth, the overall market isn’t paying that much attention to these aberrations, but is watching for economic indicators that will push investor psychology in a positive or a negative direction. And the indicators right now are very uncertain. The Big Trend is nowhere in sight.
Existing home sales for September were remarkably good—but most observers worry greatly that home sale volume will drop as the $8,000 tax credit expires. (The credit may, of course, have a bit more life breathed into it, perhaps in the form of a year’s worth of phasing out, so that the credit is $8,000 for one quarter, $6,000 for the next, and so forth.)
Meanwhile, Consumer Confidence looks dreadful, which is not entirely unexpected, given the continuing weakness in the jobs market. (See the recent jobless claims, to the left.) But the Index of Leading Indicators is lighting up fairly brightly, causing Michael Bratus at Moody’s Economy.com to assert, “The continued rise in the leading index supports our view that the recovery will extend into 2010.”
Indeed, on the whole, the economic indicators tell us we’re still slogging our way toward recovery. Keeping in mind that the last scheduled major purchase of Treasury securities by the Federal Reserve takes place tomorrow (Thursday), it makes sense to expect a change of bias among interest rates, with a slow northerly grind ahead of us, punctuated occasionally by falling rates when we encounter bad economic news. Perhaps it would be well to gear up for a changed interest rate scenario, though the Fed may continue to keep rates as low as it can.
