Good Morning All-
We have had a busy few weeks with our market. We had our rates at an all time low and now we have seen them creep up around .375% over the past 3 weeks. As I stated before (9-27 update), rates fundamentally could not get lower at that point. There was too much resistance. That proved to be correct.
We need to understand that the main entity purchasing Mortgage Backed Securities (the investments that mortgage rates are based off of) is the Fed. That's it. Many of the bond funds who used to buy MBS's, have unloaded their positions because they know they have a guaranteed buyer waiting in the wings. So it will be harder and harder to for rates to be pushed lower.
If you have those clients waiting around for lower rates, be sure to educate them on what is really happening in our market. Do not let them get caught in the media hype about "low rates" as greed can backfire.
I do truly feel that we will see rates come down a little bit (.125% or so) over the next week. The main reason is corporate earnings. Right now we are in the midst of Earnings Season. This is when all corporations release their 3rd quarter earnings. Many of them have been lack luster. With earnings there is an estimate that the street has (the market) and then based on were the actual numbers come in, we will see movement. Many companies have been missing earnings and the most recent and one of the most powerful.....Apple.
So with this plethora of missed earnings, it shows that our economy is weak, and still very fragile.
Plus we have something coming up which we need to consider.....the Fiscal Cliff. The fiscal cliff is rapidly approaching. Now what this is is a bunch of tax increases that are set to take affect at the end of 2012. Raising taxes in a fragile economy can have dire consequences. However, if we do hit this "cliff" expect rates to improve drastically. So be aware as we are only about 45 days away from the cliff. Expect there to be no real talk about this until Nov......7 one day after our presidential election. Then our government will get back to business dealing with the issues at hand.
Lastly, we just had some economic data that just hit the wires a few minutes ago. We had Q3 GDP (gross domestic product). The market estimated that we would have a 1.8% growth. The actual number came in at 2%. On the surface, that number looks good, however when the number is dissected, this is were issues arise. The Business growth portion of this number is actually negative and the personal consumption portion (what we buy and consume) was flat. Understand there will be 3 more readings of Q3 GDP. Above I talked about corporate earnings, however not all companies have released their earnings. So basically, the government estimates roughly a third of this Q3 GDP number. The final reading for Q3 GDP will not be in for another month. To really sustain growth and put an end to our recession, we need around 3% growth overall. We have a lot to go.
So what to take away from this is mortgage rates should open up better today. My feeling is that we should see an improvement in rates over the next week, but as we know volatility is the new normal.
Be aware of your market, educate your clients and let's close some deals.
Josh
We have had a busy few weeks with our market. We had our rates at an all time low and now we have seen them creep up around .375% over the past 3 weeks. As I stated before (9-27 update), rates fundamentally could not get lower at that point. There was too much resistance. That proved to be correct.
We need to understand that the main entity purchasing Mortgage Backed Securities (the investments that mortgage rates are based off of) is the Fed. That's it. Many of the bond funds who used to buy MBS's, have unloaded their positions because they know they have a guaranteed buyer waiting in the wings. So it will be harder and harder to for rates to be pushed lower.
If you have those clients waiting around for lower rates, be sure to educate them on what is really happening in our market. Do not let them get caught in the media hype about "low rates" as greed can backfire.
I do truly feel that we will see rates come down a little bit (.125% or so) over the next week. The main reason is corporate earnings. Right now we are in the midst of Earnings Season. This is when all corporations release their 3rd quarter earnings. Many of them have been lack luster. With earnings there is an estimate that the street has (the market) and then based on were the actual numbers come in, we will see movement. Many companies have been missing earnings and the most recent and one of the most powerful.....Apple.
So with this plethora of missed earnings, it shows that our economy is weak, and still very fragile.
Plus we have something coming up which we need to consider.....the Fiscal Cliff. The fiscal cliff is rapidly approaching. Now what this is is a bunch of tax increases that are set to take affect at the end of 2012. Raising taxes in a fragile economy can have dire consequences. However, if we do hit this "cliff" expect rates to improve drastically. So be aware as we are only about 45 days away from the cliff. Expect there to be no real talk about this until Nov......7 one day after our presidential election. Then our government will get back to business dealing with the issues at hand.
Lastly, we just had some economic data that just hit the wires a few minutes ago. We had Q3 GDP (gross domestic product). The market estimated that we would have a 1.8% growth. The actual number came in at 2%. On the surface, that number looks good, however when the number is dissected, this is were issues arise. The Business growth portion of this number is actually negative and the personal consumption portion (what we buy and consume) was flat. Understand there will be 3 more readings of Q3 GDP. Above I talked about corporate earnings, however not all companies have released their earnings. So basically, the government estimates roughly a third of this Q3 GDP number. The final reading for Q3 GDP will not be in for another month. To really sustain growth and put an end to our recession, we need around 3% growth overall. We have a lot to go.
So what to take away from this is mortgage rates should open up better today. My feeling is that we should see an improvement in rates over the next week, but as we know volatility is the new normal.
Be aware of your market, educate your clients and let's close some deals.
Josh
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