Mortgage Rates Average Back Higher

Better May existing home sales and the increased potential of a Greek debt deal driving interest rates higher and prices lower today. Last week tensions in the EU were high, over the weekend Greece seems to have bent to the creditor demands on pensions and taxes. May existing home sales were better than expected. One sector has emerged, young first time buyers were noticeable in the data released today.

Meanwhile, in Saturday’s WSJ was an article already be-moaning that low down payments were coming back - the thrust of the article was ‘here comes another bubble’. What trash! Guess the WSJ had a space left to fill. First the bubble in housing was fed by Wall Street firms accepting any loan, it made little difference whether loans were under-written or not - mix in poor control over LOs that has been corrected now. Wall Street discovered there was a market for US housing debt. All that they needed was to suck in S&P to get AAA ratings on the junk and making sure they made no market for puts on the CDOs issued all over the world. Housing is, and has been, the backbone for the US economy since 1945 - every recession since then was turned around by housing (except this one). No other sector can create more jobs than housing, directly and indirectly.

More housing data tomorrow.  As long as the Greek debt situation is seen as solvable there is little chance the US bond market will improve and MBS prices will head higher. The models remain bearish although last Friday they were put to the test as safety moves into the weekend over Greece did break the first resistance. The 10yr note trading now between 2.40% and 2.30% but likely will increase if a deal is reached in the EU/Greek discussions.

Mortgage rates had been walking a slow, steady path of improvement since hitting 8 month highs on June 10th.  From then on, there were only 2 days where rates did NOT improve.  As of last Friday, the average conventional 30yr fixed rate quote for top tier scenarios was as close to 4% as it has been since the beginning of the month.  Today's spike brings the average back higher.

There are several ways to view and understand this weakness.  First of all, 2015 is simply a more volatile time for interest rates, and that is not expected to change any time soon.  More specifically, Friday marked 3-week lows.  That's a pretty good run for a high-volatility environment that is mainly seen rising rates for 2 months.  Today served as a painful reminder of that.

In summary, days like today are beyond nauseating for everyone shopping for a mortgage and for all professionals who work on obtaining the loans for consumers. Rates rising are not the problem, but rather the aggressive volatility. What's disturbing is that today's move is so connected to news out of Europe that Greece is making progress towards paying its obligations. It is comical in a sense as we have seen this act play out way too many times in the last 5 years.....with the last 6 months looking more like Seinfeld reruns. Way too risky to give guidance outside of locking, but I would say that after today's sell-off, I'm hoping to see at least some relief.