Are we Moving Further and Further from those 4.5% Mortgage Rates we’ve Been Hearing About?


Consumer confidence reached an all-time low and 100,000 Americans were issued layoff notices last week, each playing a role in the mortgage market’s relative worsening.

For the third consecutive week, mortgage rates rose and average loan fees increased, too.

Amid all of the negative economic news, however, there were two bright spots worth identifying and discussing. They show that country may be closer to economic recovery than expected.

First, the supply of “used” homes for sale fell from 11 months to 9 months nationwide. This suggests that homebuyers are re-entering the housing market in force, a signal that home prices are nearing equilibrium.

And, second, the nation’s GDP — a measurement of the country’s complete economic footprint — didn’t fall by nearly as much as what the experts had predicted. A positive surprise like this makes us wonder about what else the Doomsday Economists may be wrong.

We won’t have to wonder long.

With this week comes copious amounts of data, legislation and rhetoric to influence mortgage rates. Some of the news-bites that mortgage markets will digest this week include:

  • The Personal Consumption Expenditures Index report. PCE is a preferred inflation measurement and inflation is the enemy of mortgage rates. A high reading will pressure mortgage rates up.
  • Retail stores report on same-store sales.
  • The Pending Home Sales report. This notes the number of “homes under contract” and is a good gauge for buyer interest and the general health of housing.
  • 20% of the S&P 500 firms will report earnings.
  • Congress is expected to vote on the Stimulus package.

The biggest impact on rates, however, could come on Friday with the release of January’s jobs report. Employment data is always market-mover and with the press giving so much attention to layoffs lately, expect Wall Street to be extra jittery it.

Markets expect the economy to have lost a half-million jobs last month.

(Image courtesy: Wall Street Journal Online)

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  1. Question: I am in contract for a house right now – expected to close first week in March. If this stimulus package get passed next week, how soon will rates be driven down? can I expect one in the 4.x after the bill signed?


  2. Kevin,
    Great question. I don’t think that the stimulus will do much to lower mortgage rates–at least in the short term. What is causing rates to be low is the fact that the government is buying mortgage bonds. There is no provision in the stimulus package to my knowledge to add more money to that program. Even if there was some provision, I doubt it would help you much in the next 30 days. I might lean towards cautiously floating your rate for another week or so, but only because we are trading at the top of the current range–not because of anything with the stimulus package.

    Steve Heideman’s last blog post: Comment on How The New Good Faith Estimate Form Can Help You Save Money On Your Mortgage by Steve Heideman

  3. Thanks Steve. I assumed as much. I plan to float for at least another week. If rates can fall to ~ 5 percent again, I’ll be happy.
    Any advice on how best to track mortgage rates for my loan type/geography? I’ll be using a VA loan/30 year fixed/New York. I can’t seem to find accurate daily market data.

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