Mortgage Rates Leaning in the Wrong Direction

Mortgage rates are moving sideways, but leaning in the wrong direction.  Yesterday’s announcement regarding OPEC was not good for the markets as the positive direction the mortgage bonds were heading made a retreat after five days of positive movement.

For the third time, we have had to digest the Gross Domestic Data (GDP) for the 2nd QTR. And this time, it was revised upward to 1.4% which was higher than expectations. We continue to see a historically low trend line with Weekly Jobless Claims. It was lower than expected but the focus is on the 4 week moving average which fell again.  Pending Home Sales for August were weaker than expected, with a MOM change of -2.4% vs estimate of 0.0%.  Surprisingly, sales are down from last year. The NAR cited lack of inventory and the fact that construction levels of new homes (i.e. new inventory) has been very low. 

Kansas City Federal Reserve President Esther George said that this morning's economic data shows growth continuing to move forward. She said it's time to remove some accommodation and that global economic risks are not outsized. She is a voting member and voted for a rate hike at the last meeting. Philadelphia Fed President Patrick Harker (non-voting member) said that he would have been very comfortable with a rate hike in September, but that there was some disagreement among colleagues on how much slack remained in the labor market and when and by how much the Fed would exceed its 2 percent inflation target.

OPEC meeting in Algiers came up with a statement that a production cut had been agreed on, crude oil increased 5% up $2.00. Although the rhetoric was momentarily positive for oil there was no actual agreement, that will not happen until the November meeting.

As I have noted several times over the last few days, mortgage rates are at extreme lows and a major event will need to happen to push mortgage rates lower. In addition, at these levels I have expected (and it may be happening now) to see a pullback in mortgage rates with some increased volatility. Oil is a big factor right now and the higher it goes the more likely mortgage rates are to increase.