From Stuart Crawford at V.I.P. Mortgage:
It was a relatively quiet week for mortgage rates, as we head into a potentially volatile market this week. Mortgage rates ended last week just slightly higher by a fraction.
The big economic reports (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 31st. 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, which 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 this 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.
This week will be packed with major economic events. The biggest economic report will be Friday's Employment report. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month, and it will carry even more weight than normal due to how it will influence Fed policy. A close second in importance will be Wednesday's release of second quarter Gross Domestic Product (GDP), the broadest measure of economic growth. Also on the Economic Calendar, Pending Home Sales will come out on Monday. Inflation figures, Productivity, Chicago PMI, Construction Spending, and Consumer Confidence will round out a busy week.
**Current Lock Vs. Float: I am taking a LOCK position today going into this week to protect our client’s pricing.
Stuart can be reached at 602.710.8975
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