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The Mortgage Street Smarts of where mortgage interest rates are going (and why):
The following information is current as of Thursday 4-28-2011 and will help you understand todays best mortgage rates. If you are a Buyer/Borrower who is still on the fence (or if you are a Real Estate Agent attempting to educate your "on the fence" Buyer), please review these trends and secure an historically low interest rate before it is too late.
The market closed Wednesday with an IMPROVEMENT to pricing (and will typically warrant a pricing adjustment by most Lenders). Wednesday's IMPROVEMENT resulted in a change of 12 basis points (bps).
The following chart shows the market activity thus far today (hint: upward activity is good, downward activity is bad):
The following chart shows market activity over the past 10 days (hint: green is good, red is bad):
The following chart shows market activity over the past 1 month:
Daily Interest Rate Snapshot (sample of rates from one of the country's largest Lenders...individual pricing will vary based on specific Borrower qualifications): NOTE: This Lender has quoted a 1.00% Origination Fee (1 Point) to accompany this pricing. It bears noting that this chart does not necessarily represent todays best mortgage rates.
Analyst #1 (Neil Trenerry):
FNMA 30-Yr 4.5%
Previous close 102.438
Opened Up 0.21bp @ 102.656
Key Economic Data:
EUR / USD 1.4782 Down 0.0005
USD / JPY 81.5965 Down 0.5605
GBP / USD 1.6647 Up 0.0020
Oil 112.86 Up 0.10
Gold 1,532.40 Up 15.30
Key Economic News:
GDP Near Consensus, Jobless Claims Higher
Advance estimate of Q1 GDP close to consensus, though composition slightly more favorable. Rise in jobless claims a worrying sign.
Initial jobless claims 429k in week of April 23, vs. median forecast 395k.
GDP +1.8% in Q1 (qoq annualized), vs. GS +1.75%, median forecast +2.0%.
1.Real GDP increased by 1.8% (qoq annualized) in Q1, close to our and consensus forecasts. However, the composition of the increase was slightly more favorable than expected. Most importantly, consumer spending increased by 2.7%. While down from 4.0% growth in Q4, this was well-above the consensus estimate of a 2.0% gain. In contrast, inventory investment was slightly weaker than we had thought. This mix of growth - stronger consumption and less inventory building - suggests a bit more momentum heading into Q2.
2. Other components of GDP were broadly in line with expectations. Growth in business fixed investment (capex) cooled, adding just 0.2pp to overall growth after adding 0.7pp in Q4. Firms actually purchased more equipment and software, but this was offset by a sharp decline in investment in structures. Residential investment was also a modest drag on growth (of about 0.1pp). Net trade subtracted 0.1pp from GDP growth after adding 3.3pp in Q4. This swing mostly reflected stronger imports.
3. Inflation news in the report was mixed. The overall GDP deflator increased by 1.9%, less than the consensus forecast of a 2.3% gain. However, the core PCE deflator increased by 1.5%, more than we and the consensus had forecast.
4. Separately, initial jobless claims climbed to 429k in the week ending April 23, and are now clearly above average levels for February and March. Although technical factors could be adding some noise (e.g. the Easter holiday), we now think the persistent rise indicates an actual in increase in filing activity. Overall, the latest claims reports may point to softer nonfarm payroll growth in April than March.
10:00: Pending home sales (March): Modest gain. The pending home sales index - which tracks signed home sales contracts, and leads the official count of existing home sales by 1-2 months - has recently stabilized. However, gains to date have only reversed a large decline after the expiration of the federal homebuyer tax credit. Increases from current levels may signal a more fundamental improvement in sales volumes.
Median forecast (of 32): +1.5%; last +2.1%.
Unless we see some suprises with Pending home sales, I would expect the market to continue to improve.
Analyst #2 (Dan Rawitch):
Here is the link to our daily video http://ratewatch.com/ratewatchnow.html
Well...Bernanke did well yesterday. This in conjunction with GDP cratering and Jobless claims spiking have laid the ground work for a huge gap up in bonds. We are about to test the highs of early march.
The bond market loves when the Fed promises to fight inflation...EVEN if it means tightening policy. Long term bond buyers care less about higher rates in the future than they do about inflation. Inflation erodes their return.
In the end it will always be about Jobs and Inflation. Jobs cannot grow without a strong GDP and in a normal none steroid induced economy, this is the backdrop for longer term lower rates. Just be careful if we bounce off 102.80!
For more information on topics like this, please feel free to visit www.GordonMortgage.com (an educational resource for Borrowers, Real Estate Agents, and Financial Professionals). Educational content provided by:
Jason E. Gordon
Sr. Mortgage Loan Officer
CMPS, CDPE, CMC, NMLS 259027
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