Weekly Rate & Market Update 5-26-17
Question of the week: Why is there no question this week?
Answer: I am a little pressed for time this morning as heading out on a road trip in a little bit with our oldest to look at some colleges in Northern California. Looking forward to spending three days with her as we do not get too many opportunities for prolonged one-on-one time with the kids.
Have a question? Ask me!
Last full week of the month brings some important data. Early in the week we learned that new and existing home sales were down in April from March. Existing home sales, which is of the highest interest in Southern California, were down 1.2% nationwide for the month, prices may have impacted the slow down as the national median price was up 3.3% from March and 6.0% from April of 2016. The news had no big impact on rates but does put upward pressure on rate.
Look some Fed news! Like saying “squirrel!” to a dog, saying “Fed news!” to an economist results in immediate attention. The minutes from the latest Federal Reserve Open Market Committee meeting revealed no increase in their short term interest rate, but that several members urged immediate action. Of great importance in the minutes was that the Fed is going to slowly start to unwind much of its $4.5 trillion ($4,500,000,000,000) balance sheet. Long time readers may remember waayyy back to 2008 when the Fed started buying mortgages and government bonds to provide liquidity and support the credit markets. This bloated the Fed’s assets and now it is time to put those assets back to the market. The sell-off, no matter how slow, will have an impact on interest rates and the economy as by selling its holding the Fed is taking liquidity out of the economy, and by selling rate bearing assets the prices of like instruments, i.e. other mortgages, will increase—when it comes to interest bearing investments as prices drop rates increase. I am uncertain as to how fast or soon the impact will be on rates for consumers, but any sale this large over a relatively short period of time (two, three years?) should put upward pressure on rates.
Our final item for the data-geeks was the first revision of 1st Quarter GDP. The initial GDP report for January through March showed the economy growing at a less than stellar 0.7%, the revision released this morning showed a bit more positive news of 1.2% growth. The news is a little negative for rates but no real impact today as most traders in New York have already left for the Hamptons for the long weekend leaving their minions in charge with the instructions, “don’t lose us any money.”
Rates for Friday May 26, 2017: Rates are flat from last Friday, not a lot of activity this week, and as mentioned above with the three day weekend looming traders are not taking any risks. Memorial Day weekend is the official summer kick-off and as we head into the summer buying season rates are fantastic and very stable over the past eight weeks.
FIXED RATE MORTGAGES AT COST OF 1.25 POINTS LOCKED FOR 45 DAYS:
30 year conforming 3.75% Down 0.125%
30 year high-balance conforming 3.875% Down 0.125%
30 year FHA 3.25% Flat
30 year FHA high-balance 3.75% Flat
Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down (3.5% for FHA) with 740 FICO score for purchase mortgages.
Enjoy the Memorial Day weekend. Known for the Indy 500, swimming pools being opened back East and the kick-off of barbecue season, let’s not forget the true purpose of the holiday and take time to give thanks for those who lost their lives defending our nation, its liberties and freedoms.
Have a great week,
Dennis
