Friday, February 21, 2014

Rates Higher after Fed Minutes

Mortgage Time
Mortgage Market News for the week ending February 21, 2014

Rates Higher after Fed Minutes
The positive momentum in mortgage rates shifted direction after the release of the Fed Minutes on Wednesday. Investors viewed the Minutes as somewhat positive for stocks and negative for bonds. As a result, mortgage rates ended the week a little higher.
The Minutes from the January 29 Fed Meeting revealed that Fed officials remained very divided as to the appropriate path for future policy. Overall, though, the perception of investors was that the position of the hawks remained solid, while the views of the doves may have weakened a little. As a reminder, "hawks" tend to favor less stimulus to help keep inflation low, while "doves" prefer more stimulus to boost economic growth. The Minutes stated that "a few participants" considered the possibility that it "might be appropriate" to raise the fed funds rate sooner than many expect. The Minutes also reinforced Fed Chair Yellen's recent comments that there is a high hurdle for the Fed to pause in reducing its bond purchase program. The Fed's bond purchases have helped keep mortgage rates low, and the Minutes reduced the likelihood that the program could be stretched out for a longer period of time.
The economic data released this week continued to be affected by the unusually severe weather this winter. In particular, the housing reports all fell short of expectations. January Existing Home Sales declined 5% from December to the lowest level since July 2012. They were 15% below the peak levels seen last summer. On the plus side, total housing inventory available for sale increased. The results for January Housing Starts fell even farther below expectations with a decline of 16% from December. Building Permits declined as well. Finally, the February NAHB/ Wells Fargo Housing Market index showed that builder confidence dropped sharply. Both the National Association of Realtors (NAR) and the National Association of Home Builders (NAHB) attributed the weakness in recent data to a combination of bad weather, limited supply, and tight credit conditions.

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:  919.590.1767     /