Money, Debt, Real Estate, and Credit talk with Jeff Underwood

Mortgage markets improved again last week. The combination of global economic uncertainty plus a dour outlook from the Federal Reserve pushed mortgage bonds to highs for 2011, and drove mortgage rates below their all-time lows.

Bonds were volatile, driven by the stock market’s gyrations.

On 4 consecutive days, the Dow Jones Industrial Average moved by more than 400 points. Rate shoppers in Arizona had no choice but to go along for the ride.

The week began with the market’s reaction to Standard & Poor’s U.S. credit rating downgrade. Mortgage bonds caught a boost on the news, and pushing rates lower throughout the day.

Tuesday, rates idled ahead of the Federal Open Market Committee meeting. There was speculation that the Federal Reserve would introduce a new round of economic stimulus but that didn’t happen. Instead, the Fed pledged to keep the Fed Funds Rate in its current range near zero percent until mid-2013, at least.

Mortgage rates dropped on the announcement and continued to drop until they fell to their lowest levels of the year — and of all-time — late Wednesday afternoon.

This proved to be the lowest rates of the week.

Thursday and Friday were marked by better-than-expected jobless figures and an improving Retail Sales number. Mortgage rates rose slightly.

This week, mortgage rates should be equally as volatile.

In addition to new bailout talks within the Eurozone, there is a bevy of economic data due for release in the U.S., as well as a full Fed speaker docket:

• Monday : Homebuilder Confidence Survey; Fed President Lockhart speaks
• Tuesday : Housing Starts; Building Permits
• Wednesday : Producer Price Index; Fed President Fisher speaks
• Thursday : Existing Home Sales; Fed President Dudley speaks
• Friday : Fed President Pianalto speaks

Mortgage rates have been trending lower in recent weeks and there are few reasons to think that trend will reverse. However, mortgage markets can be wildly unpredictable — especially when acted upon by an outside force such as the Federal Reserve or the U.S. government.

Stimulus and rheotoric can change mortgage rates in a hurry.

Therefore, if you see today’s rates and they fit within your budget, consider locking something in. Once rates start to rise, they’re going to rise quickly.

Also, join me at Facebook.com/TheUglyTruthAboutMoney.

Jeff Underwood, The Street Economist
The Ugly Truth About Money

The Ugly Truth About Money

Mortgage markets improved last week, carried by the same stories that have led markets better since April. Worries of a Eurozone sovereign debt default mounted, and the U.S. economy’s revival showed itself to be slower than originally anticipated.

In Greece, the nation readied itself for its second bailout in two years. The austerity measures of last year have not worked as planned. There are concerns that a default would lead to contagion, delivering the Euro region into an economic tailspin.

These fears spurred a flight-to-quality in bond circles to the benefit of U.S. mortgage rate shoppers.

In addition, last week’s U.S. jobs data fell short of expectations, giving another boost to mortgage markets.

There were 3 weak reports:

1. ADP showed 38,000 private-sector jobs created in May. Analysts expected 170,000.
2. The Department of Labor showed 422,000 Initial Jobless Claims. Analysts expected 415,000.
3. The Bureau of Labor Statistics showed 54,000 jobs created in May. Analysts expected 150,000.

Each of these data points underscores the fragile nature of the U.S. recovery, and the weaker-than-expected readings helped mortgage rates improve.

It’s the sixth week of 7 that mortgage rates in Gilbert have improved, setting the stage for a new wave of refinances.

This week, there is very little new data on which for mortgage bonds to trade. Therefore, expect the stories from recent weeks to continue to dominate headlines. If Greece’s austerity and/or bailout plan is met with investor optimism, mortgage rates should rise. If the plan falls flat, mortgage rates should fall.

There will also be chatter about the U.S. debt ceiling, another potentially negative force on mortgage rates.

If you’re floating a mortgage rate right now, consider locking in. There’s a lot more room for rates to rise than to fall.

Also, join me at Facebook.com/TheUglyTruthAboutMoney.

Jeff Underwood, The Street Economist
The Ugly Truth About Money

The Ugly Truth About Money