Mortgages rates are trying to move through the 3.5%, no point barrier but so far aren’t being particularly successful. Freddie Mac's survey is somewhat higher, reflecting an average of 3.53% with 0.8 points. The 10 year bond and the economic news support the downward move but that would represent rates moving to a new lower coupon level and there is BIG investor resistance. Explanation: Mortgages are sold by the big investors to the bond market in very large increments (hundred million dollar range) to achieve the efficiencies and yields they require. They don’t want to end up with a group of mortgages that are either at too low an interest rate or to have the market move away from that yield before they are ready to commit their pools of mortgages. Therefore they are reluctant to drop to a lower interest rate, representing a lower coupon before they’re convinced rates will stay there for a little while. With all that’s been happening in Europe over the weekends, Friday would be the least likely day to tryout a new coupon.
So where are rates? 15 year fixed are trying to reach 2.75% with no points and 30 year mortgages are solidly at 3.5% with some closing costs being paid by the lender. We should be seeing 3.375 or 3.25% but not yet.
The economic news is more of the same. Spain has everyone worried again (how many months have we been saying that?). June Existing Home Sale numbers came in at their lowest point of the year. We saw 4.37 million sales but that was well below the consensus level of 4.65 million and below the floor of the consensus range of 4.6-4.73 million. The good news is that prices are up 7.9% from last year. Nationally, supply is currently at 6.6 months, up from 6.4 months in May.
New jobless claims came in significantly higher than expected at 486,000. That’s a big jump from last week’s 450,000 which was revised up to 452,000. The “experts” had a variety of reasons/explanations but the reality seems to be that last week's unusually low number and this week’s surprisingly high number average out right at the consensus number of 365,000. If we look at the two weeks together, we’re pretty much where we should be for this point in the summer.
It's going to be hot this weekend but there aren’t any big fires going in Colorado which is great news. Our prayers go out to those injured in the Aurora shooting, their families and of course the families of the victims. It will be a very difficult period.
Have a good weekend.
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