Florida Mortgage Rate Forecast – August 10, 2010

by Florida's #1 Mortgage Planner on August 10, 2010

Locking Stance:  CAUTIOUSLY FLOATING     Mortgage Bonds:  -9bp

It is a fairly rare day this morning as stocks are down and MBS prices are failing to rally.  What gives?  Simply put, it is “Fed Day”.  That is the day the FOMC Meeting presents its Fed Funds Rate Decision and, more importantly, their Policy Statement.  Today is one of the few times when it doesn’t appear anyone knows what the Fed is going to say.

Some interesting bits of data today, some typically minor impacting but worth noting.  Weekly store sales reports showed sales down slightly.  The NFIB Small Business Optimism Index fell nearly 1 point which is consistent with a weak or recession-mired economy.  It is clear that optimism is not on a sustained recovery.  Wholesale Trade rose slightly, 0.1%, which is down from 0.5% last report.  All of these are generally not typically impacting to mortgage backed securities and mortgage rates.  However, Productivity and Costs can be.  Nonfarm Productivity came in below expectations at –0.9% versus the 0.0% expected and down from 3.9% (revised).  Unit Labor Costs came in lower than expected at 0.2% versus 1.5%, but still up from –1.3%.  Overall, the drop in Productivity was the cause for the increase in Unit Labor Costs, so inflation is not a concern, but the dip in productivity is.  Overall, the reports are favorable for MBS prices and mortgage rates.

So why are MBS prices lower right now?  As mentioned in yesterday’s Mortgage Market Weekly radio show, we mentioned the need for a correction, likely this week.  We may be seeing that right now.  Without getting into too much technical analysis, so long as we remain above the 10-day moving average, there is no cause for concern.  Things may change after the Fed release their Policy Statement (we don’t really care what they do with their rates) and also the outcome of the 3-year Treasury Note Auction.  The action starts at 1:00pm ET, so if things do not go well, look for a post here.  Also, we will be dissecting the Fed’s Policy Statement and will be posting that at AR and maybe over at Florida Mortgage Report as we done in the past.

What does this mean for Florida Mortgage Rates?  Mortgage rates are holding fairly steady and will likely do so at least until this afternoon.  Currently, the outlook remains favorable for steady to improving mortgage rates, though that may change if there is a surprise this afternoon.

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