First Time Home Buyers
Last week’s interest rate predictions proved to be spot on–we expected absolute chaos in a pre-holiday weekend and that was accurate.
The coin flip that we predicted occurred, ultimately with the coin landing on its side. Unlikely, but so are historically low rates holding in a 19-week rally.
Monday and Tuesday saw the markets set yet another all-time, historical low. Wednesday and Thursday saw a three-headed monster of better-than-expected data in manufacturing, housing, and foreign economic projections. Friday’s jobs report sent rates jumping on an already low-volume, high-volatility trading session.
Since late-April, we hadn’t seen a sell-off last three days. We did Wednesday through Friday. In spite of all of this, mortgage backed securities ended up nearly flat on the week.
This Week’s Interest Rate Predictions
We again forecast unpredictability. There is very little data due for release, especially compared to last week. Traders seek external inputs to help their trades. On week’s with full economic calendars, those reports dominate the action and reaction in the market.
On week’s with little data, mortgage rates ebb and flow on the basis of momentum in the stock market and outside influence. From news out of the White House to reports on foreign economies to watching the radar for the next tropical storm, this week’s rates will likely be influenced by at least one outside report.
That’s what makes this a dangerous time for rate shopping. This is all unpredictable.
Right now two things appear certain:
- The market is priced for absolute worst-case expectations of a double-dip recession and four horsemen riding down Wall Street in 2012
- Mortgage bonds appear overbought by every traditional metric
What this means is that, when the market changes directions, it should change dramatically. A minor upgrade to economic forecasts would drive money into the stock market and out of mortgage bonds, pushing mortgage rates up very quickly.
Flipped coins don’t land on their side very often. It could be an indicator that this 19-week interest rate rally is losing steam.
If you enjoyed this article, please consider sharing it!
