WeeklyBasis 09/05/06: Fall For Housing

Fixed and ARM rates are down about .25% over the past two weeks, and with Labor Day now behind us, the big question is: Will housing fall further this Fall? There’s certainly many clever press headlines to be written on the topic, but a headline is meant to sell a story for a few days. So, I thought share a couple quick tidbits that might help put things into a broader perspective for your clients. First, our economy is shifting from growth mode to potential recession mode. This means the Fed’s rate hike campaign might be over. As of today, Fed funds futures suggest only a 6% chance the Fed will hike on September 20. Second, if housing slows too much over the next 6-12 months, the Fed will have to provide rate-cut stimulus because housing plays a large role in helping consumers fuel the economy. The consensus across major Wall Street firms is that the Fed will cut by the Spring – the range of rate-cut predictions from firm to firm is .5% to 2.25%. As for this week, rates should be stable — not much data slated for release.

Conforming ($200,000 – $417,000) – NO POINTS
30 Year: 6.25% (6.39% APR)
10/1 ARM: 6.375% (6.515% APR)
5/1 ARM: 6.25% (6.4% APR)

Jumbo ($417,001 – $650,000) – NO POINTS
30 Year: 6.5% (6.64% APR)
10/1 ARM: 6.625% (6.765% APR)
5/1 ARM: 6.375% (6.525% APR)