Mortgage rates were essentially unchanged last week. The first half of the week was a continuous slide in the bond market. This caused mortgage rates to rise somewhat. Fuel was added to the fire on Thursday when existing home sales came in higher than expected. The fire was doused on Friday when the new home sales numbers came out lower than expected. The bottom line is that it's difficult to determine which direction the housing market and the economy in general is heading right now.
This week should be an interesting one with Ben Bernanke heading up his first Fed meeting. Most folks are placing their money on another 1/4 point hike, if for no other reason than to show that he is going to be tough on inflation. Word on the street right now is that Bernanke may not be as tough as Mr. Greenspan was.
Keep your eye on the news media. They seem pretty upset with the February existing home sales number. It flies in the face of their trumped up housing bubble and they will spend the next month trying to find as much doom and gloom in the numbers as possible. One day, perhaps they will look at the numbers that matter when predicting housing bubbles - unemployment and jobs creation. And right now, those numbers are too strong to indicate a bubble.
Rates rebounded last week with the average mortgage interest rate dropping about 1/8%. The two major forces driving the improvement were February Retail Sales and the February CPI index report. Retail sales were weak across the board in February while the CPI came in lower than expectations. These numbers together indicate that the long run of interest rate increases by the Fed are probably doing their job and that perhaps the economy is cooling somewhat.
In other real estate news, the January housing starts number was revised upward to a 12 year high. Somehow, this type of news does not receive the same press as the negative housing news we've been hearing lately. The press seems bound and determined to shove this housing bubble down our throats, but where is the data to back it up?
This week's major news release will be Tuesday's Producer's Price Index (PPI). Will the numbers confirm what we saw in the CPI last week? On Thursday we will get a look at initial jobless claims and the existing home sales numbers for February.
Another down week for the bond market caused about a 1/8% increase in mortgage rates last week in the Atlanta Mortgage Market. This was mainly due to additional fallout from the news the previous week that the European Central Bank was planning a series of rate hikes. Again, this makes European bonds more enticing to foreign investors and leads to an eroding of bond prices here in the US.
There is a busy economic calendar this week. Investors will continue to watch the inflation numbers very closely. Inflation is a key indicator for the Federal Reserve, and if we continue to see inflationary trends such as last week's hourly wage increase, the Fed may be swayed to extend their rate hikes beyond the next planned hike later this month. Probably the key release this week will be the Core Consumer Price Index (CPI) which will be out on Thursday morning.
If you are looking at locking a rate toward the second half of the week, you might consider getting it locked in before the close of business on Wednesday.
Bond rates were up nearly 1/8% over the past week due mainly to activity in the European bond market. The European Central Bank (ECB) which is the equivalent of the Federal Reserve Board here in the US, decided to raise interest rates last week. This move makes foreign bonds more competitive with US bonds and investors became nervous on this news. Much like the Fed, the ECB tends to make a number of small consecutive moves, so this may be just the beginning.
Additionally last week, the unemployment numbers were very strong once a again providing further evidence that we may be in an inflationary cycle.
For this week, the major news will be the Jobs Report which will be released on Friday morning. After a rally over the past 3 months, rates are now back very near their early December mark. This is an important support level and it could very well be tested this week.
