Fed Meeting | FOMC | Federal Open Market Committee Meeting
March 17, 2008
The FOMC is a 12 member committee that meets 8 times a year to decide short term monetary policy. The Federal Funds Rate, the rate banks charge other banks for short term [usually overnight] money, sets the stage for all rates. Lower rates result in more liquidity and should stimulate the economy. Higher rates should slow the economy. When inflation feared the Fed usually tightens their policy by raising interest rates. The Federal Funds Rate does not directly correlate with the long term fixed rates. Long term fixed rates enemy is inflation, stimulating the economy can increase inflation risk. On the other hand, lowering the Fed Funds Rate is a sign that the economy is weak. A weak economy is good for mortgage rates. The FOMC Meeting has an ELEVATED impact on mortgage rates.
Housing Starts
March 17, 2008
Much like the name, housing “starts” are the number of residential properties that have began breaking ground [excavation of a foundation]. In theory starting construction usually means that builders are confident they will be selling the home once construction is complete. This should generate everyone Read more
Industrial Production and Capacity Utilization
March 17, 2008
The Federal Reserve Statistical Release G.17 or Industrial Production and Capacity Utilization is a measure of the changes in production output for utilities, manufacturing, and mining, and the extent that this production is being used. The Production divided by the Capacity gives you the Capacity Utilization rate. Read more
Empire State Index
March 17, 2008
The New York Empire State Index is a survey of New York manufactures. It is released near mid month. There are about 175 executives surveyed in New York State that give their opinion of market conditions in the manufacturing sector today and six months into the future. Read more
grau team wrap-up | 30F 6.000% 15F 5.250%
March 14, 2008
What a week for the mortgage market! The good news - since the inflation numbers came out flat today, we can almost guarantee a -.75% Feds Rate cut on Tuesday March 18th. This should at least give some stability to the market. So much has happened this week, I am going to have to finish the “wrap-up” over the weekend. Have a great weekend!
30 Fixed/apr | 6.000%/6.100%
15 Fixed/apr | 5.250%/5.350%
Subprime Money Market | Declining Values St. Louis MO
March 12, 2008
The mortgage crisis, real estate crisis, subprime money market collapse, whatever you want to call it, has been plaguing the real estate industry especially on the coast. I hate to be the bearer of bad news, but now the Mid-West is going to be feeling the effects even harder. There is one more obstacal you will have to contend with when buying or selling a home in St. Louis, Missouri, declining real estate values. Most investors now consider the entire St. Louis area a declining market.
In the recent weeks we have had strict penalties in place for credit scores below, mortgage insurance restrictions, and now the declining market alerts are a big deal. For some investors most investors a 5% reduction to lending will be in effect across the board. Some areas in the country are limiting loan amounts to 80% of the appraised value. There are a lot of other restrictions out there. It is more important than ever to work with a St. Louis local mortgage banker that you can be confident in.
Mortgage Rates Predictions
March 11, 2008
Can I make accurate Mortgage Rates Predictions? On a day to day basis, the answer is yes. Since I track movement in the FNMA Mortgage Backed Bond Market and every basis point the market moves correlates directly with the interest rate I am able to offer, I can confidently provide mortgage rates predictions. When deciding whether to float or lock a loan, tracking trends in the Mortgage Bond market and paying constant attention to daily movements has saved my clients thousands of dollars.
There is always a degree of speculation involved anytime someone does long term mortgage rates predictions. That being said, I will speculate that we will at least have one more rally on long term fixed mortgages. The last few months of economic reports and the real estate market disaster give me no confidence that the economy is healthy. Later this week when the Retail Sales, CPI, and Consumer Sentiment reports are released I would expect to see even more proof that the economy is hurting.
Unfortunately, there are a few more factors to be considered than just the Bond Market in today’s mortgage environment. As I always say, “It’s all about RISK.” Investors are not yet confident that Mortgage Backed Securities are as good of an investment as the previously were viewed. In an effort to clean up the industry and encourage investors, credit requirements and loan level price adjustments [penalties that increase the mortgage rates based on credit scores or other layers of risk] have become exorbitant. This is still stalling the real estate market because the number of people that used to be able to qualify for mortgages has been cut in half. If your mortgage has any layers of risk to it, I would lock in on at least a 3 year arm while you can. The mortgage products like 100% financing, stated income, jumbo mortgages, second mortgages, and high LTV investment properties have been disappearing daily. Lenders have also cracked down on seasoning on title, appraisal seasoning, and loans in declining markets. Until this flight to quality is completed and the real estate market has life breathed back to it, I think we are in for more volatile hard times.
On the brighter side, the FED did basically upgrade Mortgage Backed Securities today. This should encourage foreign investors to put their money in Mortgage Backed Securities as a safe haven. I would love it if this was the spark that drives long term fixed rates back down to the low 5’s again.
Fed moves to stimulate economy, $200,000,000,000!
March 11, 2008
The Federal Reserve announced today that they will expand their securities lending. The move they have decided to make basically upgrades mortgage backed securtities. Through the Term Securities Lending Facility the FED loan up to $200 billion worth of Treasury Bonds Read more
When is the next Fed meeting?
March 10, 2008
The next Federal Open Market Committee [FOMC] meeting is Tuesday March 18, 2008. The futures market is expecting the feds cut rate to be 2.25% after the -.75bp cut rate expected on Tuesday. The FOMC meetings have an ELEVATED impact on mortgage bonds and mortgage rates. The lower federal funds rate stimulates the economy, which can cause inflation the arch enemy of Mortgage Bonds.
Mortgage Update | 2.10.2008 | 30 Fixed 6.375% 15 Fixed 5.750%
March 10, 2008
We are set for another wild week for Fannie Mae Mortgage Backed Securities. Today the mortgage bond market has moved 66bp again today. 30 Year Fixed interest rates lowered .125% at open, then rose about .25% by mid morning, and now sit almost equal to Friday. The economic reports due this week are Balance of Trade [3.11], Crude Inventories [3.12], Retail Sales [3.13], Initial Jobless Claims [3.13], Consumer Price Index [3.14], and Consumer Sentiment [3.14]. Read more
