First Time Home Buyers
Against all odds and common sense, mortgage rates improved last week.
The Fed turned off the $1.25T faucet and all expectations were for rates to surge higher. Instead, the geopolitical nightmare that is Greece and the Eurozone pushed rates lower. Two weeks ago was brutal. Last week, rates retraced 2/3′s of those losses.
Why? Because Greece has less fiscal responsibility than your average college freshman on his or her first credit card. Banks throughout Europe hold that sovereign debt and this one is a mess. The media liked to make a big deal about how the credit crunch meant that banks weren’t lending to consumers or businesses. That’s true. It also misses the real point:
They wouldn’t trust another bank OVERNIGHT. When banks can’t even get overnight credit from each other, that’s a mess. The fear right now is that the Eurozone could see credit seize up. In the event of a Greek default, it is the same problem that we faced in the US when the banks needed to purge all of that toxic debt before we could recover.
Mortgage Rate Predictions – This Week
Rates improved. Significantly. They’re still near to their highest levels of the year and they will eventually go up. We initally had a concern that procrastinating homebuyers who waited until April would lose out. They will, but to the order of 0.25% not 1.0%.
If you are waiting for the economy to go back to the old “normal,” don’t hold your breath. This is what it feels like when a 70 year debt and leverage cycle unwinds. Still, THE ECONOMY IS IMPROVING.
Last week’s data:
- Pending Home Sales posted a strong monthly improvement
- Wholesale Trade data pointed to higher consumer spending ahead
- Inflationary threats on the economy are receding, according to the Fed
Furthermore, continuing jobless claims were down again. Good news for the economy equals higher rates. Except for when an entire country is on the brink of bankruptcy.
This week is busy from Wednesday to Friday with domestic data: Consumer Price Index, Retail Sales, Consumer Confidence and Housing Starts. Strong figures will push mortgage rates higher. Resolution in Greece will push rates higher. A sneeze may push rates higher.
We’re sitting on a powderkeg right now. When it goes off, and it will, rates will jump. Expect volatility. This week, locking in before Wednesday may be your safest, near-term rate locking strategy.
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