Lake Tahoe Mortgage Loan Rates and Lake Tahoe Home Loan Rates:
This week’s FOMC meeting has adjourned with no change to key short-term interest rates. This was widely expected and hasn’t influenced the markets. However, the post meeting statement indicated that Fed Chairman Bernanke and friends were less optimistic about current economic conditions than they were when they met in June. The focal point in the post-meeting statement was the change from “moderate” to “modest” in describing current economic growth. That may be a clue that they will not be so quick to slow their current bond-buying program (QE3) in September as many analysts are predicting.
Overall, the reaction in the financial and mortgage markets isn’t as surprising as expected, which is actually good news. The lack of a knee-jerk reaction to the news could indicate that sanity is, at least temporarily, returning to the markets. We should consider the statement good news for mortgage rates for two reasons. The first is that the Fed is acknowledging economic growth is not as strong as some members were predicting or expecting to see at this time (please recall the ‘prediction versus speculation’ discussion back when bond yields skyrocketed higher due to Fed members addressing a timetable for winding down QE3). The second reason is that the statement appears to be a warning that they may not be ready to start slowing the bond-buying in the immediate future. Since the Fed is buying mortgage-related bonds as part of QE3, it will help keep liquidity in the mortgage market and keep rates lower.
The markets had already moved from this morning’s levels before the meeting adjourned at 2:00 PM ET. The major stock indexes had given up a good part of this morning’s gains while bonds had erased most of their earlier losses. Once the meeting adjourned and the statement was released, stocks have moved higher and bonds have followed suit. The Dow is now up 52 points while the Nasdaq is up 28 points. The bond market is currently up 5/32, which is a rebound of 25/32 from when we posted this morning’s commentary. That should allow most lenders to improve their rates by approximately .250 – .375 of a discount point from this morning’s pricing. I can see some lenders opting to wait for tomorrow’s open before reflecting all of this afternoon’s improvement, but as long as we have a favorable open tomorrow the rest of that improvement should show. This afternoon’s events were good news for mortgage shoppers, however, we have some very important economic data! coming tomorrow and Friday so please proceed cautiously if still floating an interest rate.
There were two pieces of economic data posted this morning but the key report came at 8:30 AM when we got the initial reading of the 2nd Quarter Gross Domestic Product (GDP). It showed that the economy grew at an annual rate of 1.7% during the second quarter, exceeding forecasts of a 1.1% increase. This means the economy was stronger during the quarter, making the data negative for the bond market and mortgage rates. Since this report is considered to be the benchmark reading for economic activity and is highly important to the markets, it caused the bond market to go into selling mode during early trading.
The second report of the day was 2nd quarter Employee Productivity and Costs data that revealed a 0.5% increase in worker productivity. This was just a bit higher than analysts were expecting, theoretically making it good news for mortgage rates. However, this was a minor variance in a moderately important report that was released at the same time as the GDP reading, so it had little impact on this morning’s mortgage pricing.
Tomorrow has two pieces of data scheduled for release. The first is the weekly unemployment update from the Labor Department at 8:30 AM ET. They are expected to announce that 345,000 new claims for unemployment benefits were filed last week, changing slightly from the previous week’s total of 343,000. The higher the number of initial claims, the weaker the employment sector is and the better the news it is for the bond market and mortgage rates. It is worth noting though, since this report tracks only a single week’s worth of new claims, it usually does not have a significant impact on rates.
The Institute for Supply Management (ISM) will release their manufacturing index for July at 10:00 AM ET tomorrow. This index measures manufacturer sentiment by surveying trade executives about business conditions during the month and is considered to be of high importance to the markets. One reason it draws so much attention is that this report is the first released each month that tracks the preceding month’s activity. A reading above 50.0 means more surveyed executives felt that business improved this month than those who said it had worsened. June’s reading came in at 50.9, above that important threshold. Thursday’s release is expected to show a reading of 51.5, meaning surveyed executives felt business conditions improved from June to July. Ideally, we would like to see a decline as it would point towards a softening manufacturing sector, especially is it falls below 50.0.