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Lake Tahoe Home Loans and Lake Tahoe Mortgage Loan Rates -Morning Update-September 18, 2013

Lake Tahoe Mortgage Loan Rates, Lake Tahoe Home Loan Rates, Lake Tahoe Mortgage Loans, Lake Tahoe Mortgage Rates, Lake Tahoe Home Loans:

Wednesday’s bond market has opened in negative territory as anxiety grows in the markets over today’s FOMC announcements. The stock markets are mixed with the Dow down 35 points and the Nasdaq up 1 point. The bond market is currently down 11/32, which should push this morning’s mortgage rates higher by approximately .125 of a discount point.

August’s Housing Starts was posted early this morning, revealing a 0.9% increase in new construction starts of housing projects. This was a bit lower than expectations, hinting at a weaker than thought new home portion of the housing sector. However, the variance was not significant considering the report is only moderately important to the markets. That has prevented the data from having much of an impact on this morning’s trading or mortgage pricing.

The markets are waiting for this afternoon’s events, which are likely to create a great deal of volatility in trading. This week’s two-day FOMC meeting will adjourn at 2:00 PM ET today, hopefully ending all the speculation about when they will start tapering their bond buying program (QE3). It is widely expected that Fed won’t change key short-term interest rates at this meeting, so it is the tapering question that is drawing so much attention. Talk on the topic has been widespread over the past several months and we have finally reached the day of reckoning for all those predictions. I would not be surprised to see a small token reduction in the monthly bond purchases, more or less to break the ice or get that first step out of the way. However, I don’t believe that economic growth has gained momentum at the rate that the Fed was expecting over the summer months, at least not enough to justify a significant reduction. They are currently buying $85 billion a mon! th in government and mortgage-related securities.

Generally speaking, a reduction in the purchases will probably be taken as negative news for the bond market and mortgage pricing. This is partly because it is mortgage-related bonds being purchased that affect mortgage rates. An announcement that they will continue to buy these bonds at the current pace should cause a bond rally and lead to lower mortgage rates while a sizable reduction ($20+ billion) will probably lead to a significant sell-off in bonds and a spike in mortgage rates. I would not be surprised to see stocks and bonds move the same direction in reaction to the Fed’s move, or lack of a move. It is my guess that a token reduction will be announced to take the first step, still maintaining the objective of the program. My estimated reduction is in the neighborhood of $5 billion or $10 billion a month. This would be an amount that gives the Fed the option to hold that level for as long as needed yet still have started the unwinding process and allows the ma! rkets to react to the fact they have started to taper.

Also, this FOMC meeting is one that will be followed by updated economic predictions and a press conference with Chairman Bernanke. Traders will be looking for any revisions to the Fed’s outlook on unemployment, GDP growth and their timetable for keeping key interest rates at current levels. The meeting will adjourn and the economic forecasts will be released at 2:00 PM ET while the press conference will start at 2:30 PM. This all means there is a very high probability of seeing a great deal of volatility in the financial and mortgage markets later today.