Our mortgage rate predictions aren’t looking so good this week. We really thought that yesterday’s ADP report and tomorrow’s Non-Farm Payrolls account would be the market movers. They weren’t. Global fear turned out to be the main story, so far, this week.
Investors have pulled out of the stock market with the Dow now below 10,000 and at a 3-month low.
The FHA loan rate is back to 5% after ticking up yesterday, but many lenders did not re-price rates late in the day. Below 5% is a possibility when the market opens tomorrow.
However, the Non-Farm Payrolls report hits first thing. We’ll have an update tomorrow, but this report has the potential to help this rally challenge all-time lows or it could push rates back up significantly with a strong reading.
How’s that for a prediction? The market is so uncertain that we’ll try and report on it, not predict it.
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Conforming and FHA mortgage rates improved last week on the combination of soft economic data and new talk from the White House about tightening up banking regulations.
The S&P dropped 4% in its worst week since October. As money left stocks, it went into bonds, and pushed FHA loan rates lower.
Since a very ugly December, mortgage bonds have made up half of the losses and it is helping with home affordability and has opened the window on another surge of refinancing activity.
This week is loaded with news and could push rates back up in a blink.
Today, the December Existing Home Sales report came in and it was very weak. This is because of a combination of factors including:
- The initial tax credit expiration date of November 30, 2009
- Sharply rising mortgage rates throughout the month of December
- A general slowdown from the holidays and from the weather
Home sales are down 16%, but there are a lot of reasons.
Later this week, we’ll see the Case-Shiller Index – a measure of home prices nationwide — and the New Home Sales report. The Case-Shiller Index has registered mild home price improvement over the past 8 months and its latest report is expected to show the same. New Home Sales should be similarly strong.
But, the biggest news of the week is the first Federal Open Market Committee meeting of 2010.
The Fed meets Tuesday and Wednesday this week and Wall Street will be watching closely. The Fed is not expected to change the Fed Funds Rate from its current target range of 0.000-0.250 percent, so, instead, markets will watching for the Fed’s post-meeting press release.
As always, what the Fed says is almost more important than what they do. If the Fed says the economy is growing and everything is going as expected, mortgage rates should rise. On the flip side, if the Fed says there are still significant risks, rates could drop a little lower.
Rates will be volatile all week, but once the Fed’s press release hits the wires, it’s anyone’s guess what will happen.
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