Mortgage Rate and Real Estate Update – Week of 11/5/12
The election looms in the wake of Hurricane Sandy, but what’s the impact on real estate and home loan rates? Is the Fed creating a housing bubble – on purpose? The President, mortgage rates, and what would happen in the event of an electoral college tie?
Mortgage interest rate and real estate news from last week:
- Market closes two consecutive storms in wake of Hurricane Sandy. This was the first two-day close in the market since 1888
- Single family housing starts up 43% from 2011. Dallas area home prices increase by 3.6% from July to August
- Home remodeling hits highest point since Q3 of 2005, showing “owners become more confident that investments in housing will hold their value”
- How do Zillow and Trulia compare to an IDX search site?
- Jobs Report released on Friday 11/2 shows 171,000 new jobs created. Great news for the economy and typically bad news for mortgage bonds, the Fed and QE3 helped keep mortgage prices from taking a hit.
- An Electoral College tie – and what it would mean
- Is the Fed creating a housing bubble with its Quantitative Easing – on purpose?
Mortgage backed securities were able to respond positively last week after bouncing off support at the 50 day moving average. This support and market rally shows a new trend that could help bring interest rates to test the lowest levels in history. While the MBS still sit 100 basis points below best levels, most major resistance has been broken and could help home loan rates improve.
What’s coming up this week on the economic calendar and what’s the impact on interest rates?
After the impact of Hurricane Sandy, much of the Northeast is still recovering and waiting for power to be restored. Between the storm recovery efforts and the Presidential election on Tuesday, the markets may be quiet in anticipation of our next Commander-in-Chief. Regardless of who is elected, the global markets are filled with uncertainty not only from the election but also with continued fears of Greece collapse.
The results of the election may not play a large role in the short-term direction of home loan rates. Interest rates are likely to only be impacted in the event that the new President is able to stimulate the economy. When the economy and employment rates are thriving, households are able to spend more and Banks are more likely to lend. As a result, home loan rates and interest rates as a whole will go up. If the elected President is not able to initiate an economic recovery, the monetary policy strategy will continue to target keeping rates low for Banks and individuals, an effort to stimulate borrowing and spending to get things back on track. Regardless of the Presidential nomination, a path to economic recovery will be accompanied by a rise in interest rates.
Here’s our strategy for the days and weeks ahead…
Home loan rates have managed to fall back to near historic lows after the rally in mortgage backed securities last week. Since MBS rebounded at the 50 day moving average and have managed to climb above the 25 day moving average, these areas will now act as a level of support. Bond prices should attempt to reach historic lows once again. In the short-term, we are advising that our clients float their interest rate with the hope the pricing can continue to improve and bring home loan rates lower. With the election as a potential catalyst, any sell-off in MBS that causes a drop below the 25 day moving average, we will quickly switching our stance to lock in rates in the short-term.
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.
