First Time Home Buyers
Mortgage rates improved last week to add to a three-week rally.
The news could have pushed rates higher. The Federal Reserve expressed continued optimism, consumer confidence moved to a 2-year high, and GDP beat estimates. Typically, that would have caused a jump in mortgage rates.
Last week, was not typical. There was a report from Standard & Poor’s that said that U.K. banks were no longer among the world’s safest. This triggered a flight to quality that helped the U.S. dollar and dollar-denominated securities like mortgage backed securities. By virtue of being the “least unstable” banking system, money moved to U.S. last week.
In forecasting mortgage rates for this week, we came in with moderately flat inflation data today. The Fed has indicated repeatedly that they are not concerned about inflation. Inflation and mortgage rates tend to move together so tame inflation is great for rates.
This week is going to be unpredictable. There are two major reports, the ADP jobs report Wednesday and then the official government report on Friday. There are two problems with this:
- These are influential reports
- The ADP report has been horribly inaccurate at predicting the government report
What this means is that we definitely expect rates to react on Wednesday and then again on Friday. Right now, the likelihood of rates going down .125% is equal to the likelihood of rates going up .25%. Odds are 2:1 against us right now.
For a first time home buyer who is under contract, it is getting to be a good time to consider locking in. If you are still shopping for your home, get moving! The expiration of the home buyer tax credit is irrelevant compared to the potential long-term costs of buying after these rates tick up further.
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