Mortgage Rates Steady

Mortgage rates held steady today, despite the potentially important release of last month's meeting minutes from the FOMC.  The most prevalently quoted conforming 30yr fixed rate for best-case scenarios remains 4.25%, but 4.125% can be had for a few extra dollars.

One of the factors helping mortgage rates stay historically low over the past few years is the Fed's direct purchase of Mortgage Backed Securities (MBS).  In 2011, the Fed laid out a loose framework for how they might begin to back out of their supportive role when the time was right.  The first step at that time was to stop that practice of reinvesting the monthly income, assuming the outright purchases had already been wound down.  But yesterday, Fed's Dudley suggested that framework might need to be revisited, and perhaps the Fed should look at raising its key policy rate before it decreases its MBS reinvestment.  This also complemented recent statements from other Fed members regarding the questionable health of the housing market.

We definitely saw some of this yesterday after Dudley.  Bond markets "bought the rumor" that the Fed was considering a change in their exit strategy.  Then today, when the Minutes were released, that rumor proved to be true, but in a way that was as anticlimactic as possible.  There was no change to the strategy, but the Minutes did indicate that the Fed was discussing it.  As such, markets had very little reaction today to the news they'd already begun accounting for yesterday.

Tomorrow markets finally get some economic news so far this week nothing has been reported. At 8:30 weekly jobless claims are thought to be up 13K back over 300K to 310K. The first of two key housing reports at 10:00, April existing home sales expected up 2.1% to 469K units -  housing is keeping the economy from growing. Most analysts this year have been over-optimistic on the sector. A better read on sales will not sit well with the bond market but likely to launch the stock market higher. Also at 10:00 April leading economic indicators, another key data point, expected up 0.4%, half the gain in March. Friday April new home sales are expected up 8.6%, given the decline in the NAHB housing market index last week we doubt that sales will be that strong.

In summary, the FOMC minutes did not offer really any surprises, but we did get our customary volatility following the release of the minutes. I am continuing the same advice for rate shoppers, if within 15 days of funding, it is probably best to lock up now as rates are holding near the best levels seen in quite some time. Longer term closings, I would float to see if we can break through the current range to lower rates.