If you've been paying attention, you know that I have the heart of a trader. I try to offer analysis 
rather than opinion. Last week, I felt the bond traders were overreacting to optimistic economic news and commentary by politicians. I generally ignore those folks and focus on the Fed. I said that one of the first rules of investing was "Don't Fight The Fed"; I won't.
This morning's par mortgage rates (with 1%origination fee):
Conventional: 5.375%
FHA/VA 5.50%
Jumbo(>$417K) 5.875%
Last November, The Fed released this:
The Federal Reserve announced on Tuesday that it will initiate a
program to purchase the direct obligations of housing-related
government-sponsored enterprises (GSEs)--Fannie Mae, Freddie Mac, and
the Federal Home Loan Banks--and mortgage-backed securities (MBS)
backed by Fannie Mae, Freddie Mac, and Ginnie Mae. Spreads of rates on
GSE debt and on GSE-guaranteed mortgages have widened appreciably of
late. This action is being taken to reduce the cost and increase the
availability of credit for the purchase of houses, which in turn should
support housing markets and foster improved conditions in financial
markets more generally.
Yesterday, Fed Chairman Ben Bernanke said this:
We continue to expect overall economic activity to
bottom out, and then to turn up later this year. Our assessments that consumer spending and housing demand will
stabilize and that the pace of inventory liquidation will slow are key
building blocks of that forecast.
Bernanke might just be off the "support the MBS market" bandwagon. If he ain't opening the Fed checkbook, expect mortgage rates to naturally gravitate towards the 6% plus level by the end of the year. This won't happen immediately so there will be periods of market overreaction, which will cause me to issue a "float" recommendation. Generally speaking, my bias has changed from "there will be sunny days tomorrow", for mortgage rates to "there may be a storm-a-brewin'".
I've got you locked if you're closing your loan before June 21. Today, I'm locking anyone who is closing by July 15, 2009. The past two weeks have been a fun ride and many of you got 5% mortgage rates by being patient and nimble. The tacit change in Fed bias has me too worried right now; lock all loans at application.
Apply online now. It's really simple and should take about 20 minutes.
