Posted by DB Wilson on Friday, February 15th, 2013 at 4:14pm.

Since Wednesday we've had economic news that has been good for bonds and bad for bonds. So the roller coaster ride for rates is continuing within a small range technically but it is affecting mortgage interest rates since we're riding the cusp between 3.5% and 3.625%.  Yesterday morning we were solidly in the 3.625% range and it looked as though we were heading for 3.75%.  After a successful 30 year bond auction yesterday afternoon, we saw rates decline and early today rates were close to bumping back down to 3.5%.  Then we saw several somewhat important manufacturing reports and the 10 year bond jumped back up taking mortgage rates with it.  The most damaging to interest rates was the Empire State Manufacturing Survey which surged a huge 18 points to 10.4 which also represents the first positive reading since July.  That reflects strong month to month growth in general business conditions though we have to wonder if it's too strong a jump to be accurate.  In contrast the Industrial Production numbers came in at the bottom end of the consensus range. So we have a mixed bag on Manufacturing and Industrial Production and no clear direction.

To add to the confusion, yesterday's Jobless Claims report came in lower than expected (good for the economy and bad for rates) but reports out of Europe are showing Germany in a full blown recession along with the rest of Europe and Japan.  Consumer Sentiment showed consumers are feeling more confident than the experts expected but still well below the levels of the fourth quarter.  The problems in Washington with the fiscal cliff, debt ceiling, Congressional stalemates and the upcoming re-visit on the debt ceiling/mandatory budget cuts have eroded some of the public's confidence.  The upbeat nature of the State of the Union probably bolstered the confidence somewhat.

 So what's ahead?  Short term, rates will be volatile within a small range 3.5%-3.75% on the 30 year mortgage.  Monday is a holiday and Wednesday and Thursday are jam packed with reports.  Longer term, rates have increased a half percent since August's lows, we are getting more improving economic reports than weak ones but Europe's worse than expected recession news will keep the world buying our bonds and that keeps rates low.  A number of economists are predicting a relatively sharp improvement in rates in March though I'm not convinced. From the real estate/mortgage point of view, I hope they're correct. 

One last bit of Real Estate/Lending news.  Although the Consumer Finance and Protection Board has a slew of new regulations and enforcement coming on board, the President is stating that he believes that maybe the regulation and credit tightening pendulum may have swung too far and that all the regulations are hurting the housing market and the economy.  As all of us in the industry and any consumer that has purchased a home or refinanced in the past year can attest, the pendulum is pretty far to one side. Hopefully the President will follow through with that thought.

Just For Fun

I couldn't make this up.  In the parking lot of Whole Foods in Boulder was a Lexis SUV driven by a very senior citizen with the following handwritten sign taped to the dashboard:  Seatbelt then Gas.

Have a great weekend!

Jed Marquis

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