Homebuyer Opportunity? - A look at Demand, Rates, and PricesOct 31 2011
After a slight weakening earlier last week, mortgage rates have improved the last two days straight. The cause, once again, appears to be largely international. Concern lingers around how European leaders will raise the capital for the new EU bailout fund, which tapered some of the gains made in global equities last week. We also see Japan’s Central Bank selling Yen into the foreign exchange market. Domestically, Personal Income levels in September were reported to rise only 0.1% vs the 0.3% expected, and some are predicting Friday’s October Employment reports to disappoint. All of these market events have helped surge the popularity of U.S. Treasuries, which in turn has fueled better mortgage rates.
Late last week, September’s Pending Home Sales report showed a decrease of 4.6% vs expectations of a 0.4% increase. Some believe this to be a significant opportunity, with three major forces in the homebuyer’s favor:
1. Sales are slowing which puts power into the homebuyer’s hands
2. Home prices are lower, as seen last week with S&P’s Case Shiller index showing a 0.5% home price drop in August
3. Mortgage rates continue at aggressive levels, fueled by U.S. government support and international economic weakness
We continue to look toward announcements from the Federal Housing Finance Agency, Fannie Mae and Freddie Mac surrounding their expansion of the Home Affordable Refinance Program (HARP). More details are expected in the weeks to come, with the program expansion taking affect in December.
We also have a slew of economic reports for October due later this week. Keep a close eye on statements from the Federal Reserve, along with Manufacturing figures on Tuesday, and Employment reports on Wednesday and Friday. Many of the reports released throughout the week will not only drive rates, but also set the stage for November.