Mortgage Rates Improve Despite Positive Data

The type of positive economic headlines seen yesterday would normally lead to lower bond prices and higher mortgage rates, but that turned out to be far from the case.  And though MBS initially moved lower, that trend soon reversed and we saw the best day of gains all month as the internal components of the economic reports were not as strong as the headlines suggested.  A few examples of this phenomenon... 

• The official headline on housing starts showed a gain.  Good news right?  Not so fast!  This report includes BOTH single and multi family units, and when those multi-family units were taken out of the equation, single family housing starts were actually down  3%.  
  
• The official headline on Jobless Claims showed a decrease in first time unemployment filings.  Good news right?  Yep, you guessed it...  There are other important components in here that don't make it into the headline.  In yesterday's case, the CONTINUING CLAIMS came in unexpectedly higher. 
  
• Lastly, the headline Philly Fed index posted its second straight positive reading.  Good news right?  The "catch" on this one was the "new orders" decelerating its recent pace of improvement.  Not as big of a deal as the otheres, but a counterpoint to the positivity nonetheless.  rose at a slower pace.  

The pace of the gains was high enough and steady enough that many lenders released mid-day reprices for the better.  That may not matter much at the moment as MBS have been mostly weaker this morning.  That means that the first rate sheets available today might not reflect all of yesterday's gains, though on a comforting note, they SHOULD be slightly better than yesterday AM. 

With absolutely no scheduled economic data today (due to a market even known as "quadruple witching"), let's turn our attention the first time home buyer tax credit that's due to expire at the end of November.   If you are considering buying a home to take advantage of this stimulus, I hope you checked out the videos and links in yesterday's blog.  One concern as the expiration nears, is that lenders turn times might start to increase as demand picks up.  I am already seeing a couple lenders turn times increase so make sure you get out there and find a home quick.  If your loan is delayed for any reason and closes after November 30th, you will not get the tax credit.   Use the comments section to discuss your personal experiences or ask general questions about lender turn times.

Early reports from fellow mortgage professionals are indicating that the par 30 year conventional rate mortgage has improved to the 4.75% to 5.00% range for the best qualified consumers.  In order to secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including one point loan origination/discount/broker fee.  If you are seeking a 15 year term, the par rate has also dropped to 4.25% to 4.50% for the best qualified. 

Since we have seen rates dip this week, and since they're at or very close to their best levels of the last four months, it would be exceedingly wise to consider locking if you don't want to run the risk of higher rates.  As always, there's no way to know which way rates will go, but in general, the risks of some temporarily higher rates in the near future is higher than normal from a historical perspective.  On a more technical level for those interested, MBS have been confined to a trading range (think of it as a "floor" and "ceiling" that contain all our recent price movement) for weeks now.  As we're currently at the top of that range, history shows a slight predisposition to resist further improvements.  

Remember, the only way you win by waiting is if rates move lower, but how much lower could they go?   Everybody wants to lock when rates are at the lowest level, but the problem with that strategy is that you don’t know when rates are at their lowest point until they start to rise and then it is too late.   And rates rise at a much quicker pace than they will move lower.  So give some earnest consideration to whether or not current rates are good enough to satisfy your financial goals.