Mortgage Rate and Real Estate Update – Week of 10/29/12

NYSE closed and Bond Markets closing early with Hurricane Sandy bearing down on the Northeast.  Zillow launches its “Foreclosure Center” for prospective home buyers.

Mortgage interest rate and real estate news from last week:

• Zillow reports that U.S. home values saw their largest gain since 2006 with values jumping 1.3 percent in the third quarter
• Zillow launches its “Foreclosure Center” to give prospective home buyers access to pre-foreclosures, foreclosures and auctions in their area – http://www.zillow.com/foreclosures/
• Fed policy statement hints of continued slow growth with QE3 bond buying until the U.S. economy can support itself
• Third quarter GDP grew compared to the second quarter.  Increased home buying helped fuel the growth
• Japan launches stimulus of $9.4 billion to increase growth and avoid “the risk of a Japanese fiscal cliff”
• Bank of America’s $4 billion purchase of Countrywide costs B of A more than $40 billion after write-downs, legal expenses, and settlements

What’s coming up this week on the economic calendar and what’s the impact on interest rates?

With the Bond Markets closing early on Monday in the wake of Hurricane Sandy, prices of mortgage backed securities opened higher but light trading is expected until the storm passes.  SIFMA, who oversees the Bond markets, has announced that Bond markets will also be closed on Tuesday.

Core PCE was released upon market opening on Monday and showed a slight increase, a signal that inflation is starting to creep into the picture.  However, the Fed still maintains a stance that inflation is not a concern.  Halloween on Wednesday could prove to be a spooky trading day as investors hope to be back in action after a weather induced trading hiatus.

Weighing heavy on their trading direction will be the ADP Employment Report, Employment Cost Index and Chicago PMI, all scheduled for release on Wednesday morning.    The reports continue on Thursday with Initial Jobless Claims and the national manufacturing index, ISM.  ISM measures expansion or contraction in national manufacturing with a number over 50 signaling expansion and a number below 50 signaling contraction.  The week closes with the Friday morning release of a highly anticipated Jobs Report.  Having shown signs of growth and lower unemployment, more of the same is expected for the last Jobs Report before the election.

Here’s our strategy for the days and weeks ahead…

Bond prices and home loan rates won’t see much activity over the coming days, but we will be on guard when the markets reopen on Wednesday.  With a heavy dose of Bond impacting news and shorter window to accomplish their Bond purchasing for the week, we could see home loan rates make an attempt to get back to their best levels ever.  We will be watching the market reports closely throughout the week.  Should pricing fall below current levels of support, we will recommend locking.

We maintain an ongoing dialogue with our clients about the market and interest rates throughout their financing experience so we can take advantage of the lowest rates when they present themselves. We all want the lowest rate, and the best way to ensure that you get the lowest rate, is to build a relationship with your mortgage planner, so they can best advise you on when to lock in your rate. Call us today for a complimentary mortgage review or Apply Online.