Mortgage Rates Continued Upward

Mortgage rates continued to move up wiping out last week’s gains as we are now seeing an easing in overseas geo-political issues.  The most prevalently-quoted conforming 30yr fixed rate for top tier scenarios remains 4.125% - 4.25%. 

Two better housing reports already this week suggest the market may be improving as interest rates have fallen. Yesterday the NAHB housing market index for August showed increased activity in the new home business.  Construction of multifamily projects such as condominiums and apartments rose 28.9% to an annual rate of 437,000, the most since January 2006 and the second-strongest since February 2000.

July CPI also out today, inflation is still not increasing and running below the Fed’s target of 2.0%. Starts in the U.S. reached the highest level in eight months, adding to evidence the U.S. economy is gaining traction, while the cost of living rose in July at the slowest pace in five months.

Tomorrow the Fed will release the minutes of the 7/30 FOMC meeting.   Friday Yellen and Mario Draghi will speak at the Fed’s Jackson Hole annual meeting of global bankers. The minutes are always a subject of discussion, expect that to be the same but with Yellen and Draghi on Friday the minutes are not quite as interesting as usual. Yellen continues to fret about the quality of jobs as she should - job growth is over-stated by the headlines and over-hyped by Wall Street and all the bulls that choose not to think about quality and focus purely on quantity. The topic of her speech on Friday; “The Labor Market”.

In Ukraine - the government reporting more progress against the separatists while negotiations have intensified.   Talk is increasing, that is good and lessens the fear factor, at least for the time being. German Foreign Minister saying he believes Russia and Ukraine have shifted their positions and are both looking for a way to reach a cease-fire.

In Israel - Israel suspended talks with Palestinian factions in Cairo after three rockets from the Gaza Strip landed in southern Israel, breaking a cease-fire aimed at allowing negotiators to broker a long-term truce. Nothing of substance from Iraq.

Geo-politics is being pushed back ahead of the Jackson Hole symposium beginning on Friday with Yellen and Draghi - and no increase in tensions.

The 10yr note is now very overbought based on the 14 day RSI, every time over the last year when the index has declined to the current level there was a bounce. If there is any relaxation in Ukraine/Russia look for interest rates to increase a little, but the larger trend will continue to remain bullish.  The overbought technicals are easing, the larger trend continues positive for now and until the 10yr note rate increases above 2.50%, 10 basis points higher than now. Fundamentally economic data is mixed, some better, some not so good; there is no inflation on the radar and unless Yellen changes her inflation outlook traders won’t have to worry just yet.

In summary, you simply cannot go wrong by locking at this level. We're right on the edge of a potential move higher, and these are the best rates we've seen in about a year. Locking right now protects you against a potential move higher, while capturing the best rates in the last 12 months.

Keep a strong look at the markets and continue to cautiously float if you do want to take a risk. Remember, if you want to know the benefits of locking your rate today versus floating, simply give me a call at 314-744-7806 or visit me on my website at www.CallTheMoneyMan.com. I have access to real time Wall St. data and instant market alerts with breaking news that I monitor throughout the day to assist us on making the informed decision.