WeeklyBasis 08/14/06: Buy Cheaper Homes, Refi Later

Fixed and ARM rates are up by about .125% since last week following the Fed pause and a cease fire (however tentative) in Lebanon. The Fed’s decision not to raise rates another .25% caused rate markets to trade down leading up to the Fed meeting last Tuesday. Middle East violence fueled an over-reaction leading up to last Tuesday and rates are now going through a small correction. PPI and CPI on Tuesday and Wednesday will be our first chance to see if the Fed is right in saying that inflation is under control – if these inflation numbers are subdued as estimates call for, rates should stay even. We will also likely see a decline in housing starts and building permits when that data is released Wednesday, which markets would interpret as a sign of the economy slowing. All of this means rates should stay in their current range short-term, but as I’ve been saying, it’s likely rates will drop late this year or in the early months of 2007 as inflation concerns deflate and growth concerns grow.

Conforming ($200,000 – $417,000) – NO POINTS
30 Year: 6.5% (6.64% APR)
10/1 ARM: 6.5% (6.64% APR)
5/1 ARM: 6.375% (6.525% APR)

Jumbo ($417,001 – $650,000) – NO POINTS
30 Year: 6.625% (6.765% APR)
10/1 ARM: 6.75% (6.89% APR)
5/1 ARM: 6.625% (6.775% APR)