Monday, July 29, 2013

Big Week Ahead

Mortgage Time
Mortgage Market News for the week ending July 26, 2013

Big Week Ahead
Ahead of major economic news next week, it was a relatively quiet week for mortgage rates. Mixed economic data and average Treasury auction results provided little direction. As a result, mortgage rates ended the week just slightly higher.
The big economic reports this week, New and Existing Home Sales, contained mixed news relative to the consensus forecasts. While investors were expecting even better results in some areas, the performance of the housing sector remained encouraging. June Existing Home Sales held steady, close to multi-year highs, and they were 15% above the levels seen one year ago. June New Home Sales jumped 8% from May to the highest level since May 2008. This is significant because New Home Sales reflect signed contracts (Existing Home Sales measure closings), meaning that the improvement seen in June took place despite the recent rise in mortgage rates.
The reaction to recent Fed announcements has been large, and investors are attempting to anticipate what the Fed will say at its next meeting on July 31. The big question is when the Fed will begin to taper its bond purchases. The Fed is currently using two primary tools to stimulate the economy. The Fed's traditional tool is to adjust the fed funds rate, but they reached the limit for this approach when they lowered the fed funds rate to near zero in 2008. To loosen monetary policy even further, the Fed initiated its bond buying program. Recently, Fed officials have indicated that it soon may be time to scale back the program, which has caused long-term interest rates to rise. The reaction to Wednesday's Fed statement will depend primarily on whether investors expect the Fed to taper sooner versus later. Fed officials may attempt to contain any rise in long-term rates by providing firmer guidance toward a low fed funds rate for a very long time.

Davis Orebaugh
Mortgage Consultant
NMLS #:   / NC 323545
OnQ Logo large.jpgNMLS # 5645
2501 Blue Ridge Road, Suite 370
Raleigh, NC 27607
Phone:  919.926.7554 Cell:  919.740.7049 Direct Fax:  919.400.4824     /