Moorings Column April 16th

Hello and welcome to this week’s edition of Moorings, your source where local and national mortgage and real estate news meet. I hope everyone had a wonderful Azalea Festival weekend and enjoyed some time with friends and family.  First off this week, let’s take a look at interest rates which have once again come down, though only by a fraction. A customer looking to purchase or refinance a home with a conventional thirty year fixed rate mortgage can expect an interest rate of 4.125%, which is down by an eighth of a percent from last week. If you’re looking for a government secured loan, then an FHA might be the way to go as those are currently being offered at 3.875%.


In major economic news, here’s what happened last week…and how home loan rates were impacted by it. Inflation news hit the wires, with reports on both the wholesale and consumer levels. The wholesale-measuring Producer Price Index (PPI) showed that prices remained mostly unchanged during March. Remember, inflation hurts the value of fixed investments like Bonds (including Mortgage Bonds, to which home loan rates are tied)…so the lack of inflation on the wholesale side was good news for Bonds and home loan rates. Also helping Bonds and home loan rates last week was the tame inflation data from the Consumer Price Index (CPI). The headline reading for March was right in line with estimates. When stripping out volatile food and energy, the Core CPI was also in line with estimates…but the year-over-year number was 2.3%, just slightly higher than the previous reading of 2.2%. While this raises eyebrows a bit, the Fed is still reiterating that inflation remains subdued. That being said, if the Core CPI continues to rise, bonds and home loan rates will have a tough time improving much further, regardless of other factors.


One key factor to keep an eye on is the labor market, as Initial Jobless Claims increased 13,000 to 380,000 for the week ending April 7. This came as a real shocker to the markets as they were expecting continuing job growth.  This marks the highest Jobless level since January, and the second highest reading for 2012. The Fed has acknowledged that job creations are short of their goals. In fact, last week Federal Reserve Vice Chairman Janet Yellen said that weakness in housing, the European debt crisis, and government spending cuts are likely to slow the pace of recovery and expansion. She did state that the Fed has plenty of stimulus tools to use, if economic conditions warrant another round of quantitative easing, which is the FED buying Mortgage Backed Securities, which will keep rates down.


The bottom line is that many factors will impact the direction in which Bonds and home loan rates move in the weeks ahead. The good news is that home loan rates remain near historic lows and now continues to be a great time to purchase or refinance a home during this incredible buying opportunity of low home prices, great selection, and low interest rates. . Well that’s all for this week and until next week be Blessed and Numbers 6:24-26 be on you.