WeeklyBasis 9/25/10: Preview of Next Week’s Home Price & Economic Growth Reports
Rate/Market Recap, Week of September 20
Rates dropped .125% last week, mostly because of mortgage bond rallies following Wednesday’s Fed meeting where they alluded to more quantitative easing if economic conditions didn’t improve. This means they’d buy more mortgage bonds to bid prices up and rates down.
Last week we learned that August new and existing home sales were both the second lowest ever behind May and July respectively. Yet the National Bureau of Economic Research said the recession ended June 2009. There are 14.9 million unemployed people and another 8.9 forced-into-part-time people who would probably disagree.
Rate Factors Week of September 27
There are 7 economic outlook speeches this week by senior Fed officials which will give markets clues about more potential quantitative easing.
Tuesday’s S&P Case Shiller July home price report is critical. June showed 4.2% year-over-year price gains, but June data was the height of activity prior to the federal homebuyer tax credit deadline, so July might look more like the record low new and existing home sales from July and August.
Market reaction to Thursday’s third of three 2Q2010 GDP readings is hard to predict. The second reading of 1.6% was a big drop from both the first 2Q reading of 2.4% and the final 1Q reading of 3.7%. Normally this weakness would cause a mortgage bond rally, bringing rates down. But the opposite happened because traders didn’t think the 1.6% number was weak enough.
Friday we’ll get the latest on consumer sentiment, the August Personal Consumption Expenditures Index (the Fed’s favorite inflation gauge), and also the August Personal Income and Spending.
And throughout the week there are $100b in Treasury auctions: $36b in 2-year notes Monday, $35b in 5-year notes Tuesday, and $29b in 7-year notes Wednesday. These auctions can cause bond market oversupply concerns and trigger rate-hiking mortgage bond selloffs.
Correction On October 4 FHA Mortgage Insurance Hikes
The last WeeklyBasis incorrectly reported the new FHA mortgage insurance premiums. HUD has been allowed by law to increase monthly FHA premiums to 1.45% but HUD isn’t raising it that high. They’ll increase monthly mortgage insurance from .5%-.55% to .85%-.9% and decrease up-front mortgage insurance from 2.25% to 1%. On a $500k loan this is a net monthly cost increase of $112. More details here.
CONFORMING RATES ($200,000 – $417,000) – 0 POINT
30 Year: 4.25% (4.36% APR)
FHA 30 Year: 4.25% (4.37% APR)
5/1 ARM: 3.0% (3.12% APR)
SUPER-CONFORMING RATES ($417,001 to $729,750 cap by county) – 0 POINT
30 Year: 4.625% (4.74% APR)
FHA 30 Year: 4.37% (4.51% APR)
5/1 ARM: 3.375% (3.49% APR)
JUMBO RATES ($729,751 – $2,00,000) – 1 POINT
30 Year: 5.0% (5.13% APR)
5/1 ARM: 3.875% (3.99% APR)