Mortgage Rates Still in Tight Range

Mortgage rates are still in the tight range, but has moved back up towards the top of that range, as narrow as it is.  This does not necessarily mean that the rate is higher, but that the fees associate with the rate might be changed from your previous discussion with your loan officer. At 11:00AM, the 10yr is generally unchanged from yesterday and MBS prices about the same also. Stock indexes in the futures market trading are a bit higher.

This morning’s news saw the weekly MBA mortgage applications were anemic - the purchase index fell 3% in the week but was 10% higher than in the same week a year ago. The refinance share of mortgage activity continued to rise and was up 1.1 percentage points to 47.8%, the highest level since February. The apps were still supportive to an increasing housing sector, although measured in historical perspective, housing markets are soft.

July housing starts and permits were released as starts were weaker at 1155K, down 4.8%. Building permits were also lower at 1223K, down 4.0%. The headlines did not look good, but a lot the declines were in multi-family. Even with the miss, it still looks good for housing and will add to Q3 GDP outlooks for the time being. Rates have continued low, but with interest rates expected to increase (at least that is the general view), the housing markets may be in jeopardy if that outlook occurs. That said, history does provide a different outlook.  Many times, over the last 50 years when rates were beginning to head higher, the demand for housing has increased as consumers were more motivated to act.

Crude higher this morning ahead of the weekly EIA inventory levels reported at 9:30AM. 

At 1:00PM, the minutes from the July FOMC meeting will be released. In the policy statement released after the meeting, the general takeaway was that the Fed has been increasingly concerned that inflation isn’t edging higher with low unemployment. Prices at the consumer level continue to be contained as retailers and energy prices continue to be stable and wages only slowly increasing. We expect the stock and bond markets to be stable, with little change through the rest of the morning with the FOMC minutes this afternoon.

The slight increase in rates has softened my models.  I do not see rates increasing much, but as long as money stays put in equities and there is softening of geopolitical tensions, it is hard to square yields will move much lower. At present levels of rates, unless there is a retreat from stocks and/or war fears, there is little incentive to move to fixed income. If the dollar were to begin increasing, that would tease forgiven investors to US assets.