Mortgage rates moved lower a few basis points yesterday after prices of mortgage backed securities steadily appreciated throughout the day. At 5pm, MBS prices were near their highest level in over 4 months.  The main driving force of the move higher was a much weaker than expected existing home sales report. Since many believe that the economy will not recover until housing improves, this disappointing report led to investors selling stocks and moving their money into the relative safety of the fixed income market.  Currently, MBS prices sit at the very top of the recent trading range that has kept mortgage rates relatively stable over the last few weeks.  By days end lenders passed along the best rates we have seen since early summer. 

This morning several pieces of economic data were released to the markets. First out, the U.S. Department of Commerce released the monthly Durable Goods Orders report.  This report gives us a measure on the strength of manufacturing by tracking the orders for big ticket items such as appliances or vehicles.   Durable goods orders give market participants an idea of how busy factories will be in the months ahead. Increasing orders for goods indicates that factories will be busier....which might lead to more hiring and more consumer spending...which would be positive for stocks. Its one big supply chain of money flow!

Durable goods orders for August fell 2.4%, economists were expecting a increase of 1.00%.  The previous month’s report was also revised lower.  When excluding transportation orders, the report is not quite as ugly posting no change from the prior month. READ MND STORY

Next came the Reuter’s/University of Michigan’s Consumer Sentiment index. This data gives us a read on how the consumer is feeling.  An optimistic consumer is more likely to spend money which is good for economic growth and the stock market, while a pessimistic consumer is more likely to save money which would benefit the fixed income sector.    This report is a survey of 500 households on their personal financial conditions and attitudes about the economy.    Today’s report is the revised reading for September and expectations are for a slight increase from the 70.2 reading we received earlier this month.   The release indicates that consumer sentiment continues to improve, beating estimates with a 73.5 read.. 

The final report of the day looks into housing....New Home Sales data.  This data measures the number of newly constructed homes with a committed sale during the prior month.  An increasing trend is positive for our economy since the purchase of a new home would lead to purchases of goods that filled the home.   Recent readings of this report has shown that new home sales are improving; however, so has the existing home sales report which came in disappointingly low yesterday.  The report indicates the new home sales have also declined last month coming in lower than economists’ expectations at an annualized pace of 429,000 vs 445,000 expected.  Additionally, the prior month’s data was revised lower from the initial pace of 433,000 to 426,000.  With the expiration of the first time home buyer tax credit quickly approaching, this and yesterday’s report on existing home sales raises questions of whether the housing sector can continue to improve in the months ahead.READ MND STORY

Anybody think the FTHB tax credit will be extended?

Reports from fellow mortgage professionals indicate that the par 30 year conventional rate mortgage is in the 4.75% to 5.00% range for the best qualified consumers.  In order to secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including one point loan origination/discount/broker fee.  If you are looking to access equity in your home, expect either a higher interest rate or additional fees.

After a busy week of data, Treasury auctions, and the FOMC meeting, MBS remain at the top of the current trading range and mortgage rates are holding near four month lows. It has been my position to advise consumers to lock when at the top and to float when near the bottom of this range.  So, I will continue to advise locking as we are seeing the best mortgage rates since early this summer.   It is always risky floating over the weekend as many events can take place that dramatically moves the market on Monday.