WeeklyBasis 05/23/05: No Bubble with Record Home Sales?

Rates/Commentary, week of May 23, 2005. Rates are holding to lows from last week. This week’s data includes Fed meeting minutes Tuesday, which will give us a follow up on last week’s inflation data; existing and new home sales Tuesday and Wednesday; and personal income and spending Friday. Should be no surprise from the record home sales figures. So there’s been a shift in bubble sentiment. Everyone’s been saying inflated housing prices will burst when rates spike. But the question now is: what if rates don’t spike? Last week, PIMCO’s Bill Gross, manager of the world’s largest bond fund, called for 10-year Treasuries to be right in their 1Q2005 trading range for the next 3 to 5 years. The week before that Merrill Lynch’s head economist said aging baby boomers will move their nest eggs from stocks to bonds, keeping yields (rates) low for years. Nobody can really answer the ‘what if rates don’t spike’ question over the long-term, but this type of information sounds like good news for now.

Conforming ($200,000 – $359,650) – NO POINTS
30 Year: 5.5% (5.64% APR)
15 Year: 5.25% (5.39% APR)
5/1 ARM: 5.25% (5.40% APR)

Jumbo ($359,651 – $650,000) – NO POINTS
30 Year: 5.875% (6.015% APR)
15 Year: 5.5% (5.64% APR)
5/1 ARM: 5.375% (5.375% APR)