Jeff’s Carlsbad Blog for First Time Home Buyers


Market Update from CHRIS COMER (guest blogger)

Posted in Housing Market,Mortgage info by Jeff Dowler on February 2, 2007

To All,

Since my last update we’ve seen a small up tick in mortgage rates.  As you may have read, rates are at their highest since October of last year with the national average on a 30 year fixed at 6.34%.  I hope that over the next couple weeks the bond market settles a bit and mortgage rates come down off their highs.

The biggest obstacle for mortgage rates, and interest rates in general, is the uncertainty of if and when the FED will begin lowering interest rates to spur growth.  Rates typically see a bump prior to a FED meeting as bond traders position themselves for unfavorable news.  The days leading up to this weeks FED meeting were no different.  With the FED keeping bond traders on edge along with signs that the economy is stronger than most had predicted, the 10 year bond yield reached 4.9% which is the highest since last October.

A couple key things happened this week.  As you know, the FED did not change their overnight lending rate voting to keep rates where they’re at.  Minutes from the meeting suggest that inflation is still the biggest concern for the FED although they did mention inflation is moderating.  Most economists hope the drop in oil prices would continue to keep inflation at bay and point toward the FED cutting rates sooner than later.  However, the last three months employment reports paint a different picture.  January’s employment report released today shows the economy added 111,000 new jobs.  This was below forecast of 150,000 jobs.  This had little effect on the bond market because the two reports prior, November and December, showed substantial job growth well above expectations.  Not to mention, November and December’s numbers were revised upward another 81,000 jobs which help to more than make up for January’s weaker than expected reading.  Employment continues to remain strong and is probably the strongest argument as to why the FED may just leave rates alone for all of 2007.

 

So it looks like my market report at the beginning of 2007 is still holding true.  That is, it doesn’t appear at this point that we’ll see any significant changes in mortgage rates for 2007.  Keep in mind this doesn’t mean we won’t see small movements of +/- .25% from month to month. Right now we’re on the high side of the .25% movement.  Rates should continue to hold in a narrow range from 5.75% to 6.25%.  Oh, and the national average of 6.34%, I can beat it rather easily.  How about 6%?  I’m recommending to anyone who isn’t closing for another 30 days to float their rate.

Stay tuned!  If I hear something that will move rates immediately,  I’ll let you know.  For a daily market update, please visit my website.

Have a great weekend!

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