Monday Market Commentary Aug 24 2009: Where are mortgage rates headed?

by Alex Stenback on August 24, 2009

home-sale-vs-mortgage-rates.gif
Existing Home Sales Vs. 30 Year Mortgage Rates, via Barron’s Econoday

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Monday Market Commentary is a weekly post on the week ahead in the mortgage market.  I’ve published this here since 2004 with one thought in mind:

Deciding when to lock your rate is not about knowing where rates are going, but about understanding the market, avoiding dumb risks, and taking smart ones.
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Last Week:
Mortgage rates drifted slightly higher last week as stocks rallied on the heels of a better than expected exisiting home sales report. Benchmark 30 year rates posted increases from .125%-.25% by weeks end.

Most of the damage to rates occurred Friday, when new home sales printed the best number in two years and stocks went on a romp.  This despite relatively mortgage-rate friendly reports on infaltion (PPI: non-threatening), weekly jobless claims (576K: stopped falling), and manufacturing (Philly Fed: Weak but improving)

This Week:
The backdrop:  Uncle Sam is set to issue 109 billion dollars worth of notes and bills this week. This is no mean sum.  I’ve discussed the impact that sort of supply can have on mortgage rate prospects before, but for the benefit of new readers: Supply can act like a current that the mortgage market must overcome to see any improvement in rates.  Simply put, they can improve, but it is just tougher, because the market is swimming upstream.

The economic calendar proper will give readings on Consumer Confidence, Durable Goods Orders, New Home Sales, Gross Domestic Product, and Personal Consumption this week.

Friday’s personal consumption expenditures report is widely regarded as a key yardstick for inflation, and is likely the most important report for mortgage rates this week.  That said, I am keeping an eye on stocks, and some of the normally second tier reports like New Home sales – any positive surprises suggesting a stronger than expected economy can hurt mortgage rates quickly.

This Week’s Economic Calendar [Barron's]

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Watching Rates?  If you like this update, you’ll love following mortgage related events in (almost) real time via our Ratewatch Twitter Feed.  Click right here to subscribe.

{ 1 comment… read it below or add one }

Jason August 26, 2009 at 12:46 am

It’s hard to believe that the housing market has bottomed, but the surge of buyers and the decreasing of supply per buyer may lead someone to believe that the worse is behind us. However, with the cure rate decreases to around 6%; I’m not sure how many people around the twin cities are delinquent. Is there any data to these kind of statistics? Thank you.

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