Florida Mortgage Rate Forecast – August 3, 2010

by Florida's #1 Mortgage Planner on August 3, 2010

Locking Stance: CAUTIOUSLY FLOATING     Mortgage Bonds:  +19bp

Mortgage backed securities are have turned higher today, but are currently right up against resistance so we will need to wait to be sure if they are going to be able to keep the trend going.  This morning’s news and data are favorable for MBS prices and low mortgage rates, but may not be enough to get them to break free.

Inflation was on the top of the list today as the Personal Income and Outlays Report was released.  Within this report is the Fed’s favorite gauge on inflation, the Personal Consumption Expenditures Index, or PCE.  Headline PCE came in at –0.1%, keeping inflation on the tame side as was mentioned in this week’s radio show.  Core PCE came in at 0.0%, just below expectations of 0.1% and that is very favorable for MBS prices.  Personal Income came in at 0.0%, below expectations, and Consumer Spending was also 0.0% versus expectations of 0.1%.  All this data favors mortgage backed securities and low mortgage rates.  For starters, Ben Bernanke has stated that they want to see a bump in consumer spending to help strengthen the economy and that is not happening, at least not in this report.  In fact, consumer spending has softened over the last 3 months.  Weekly store sales reports were mixed and typically don’t affect the markets much anyway.  Pending Home Sales goes against the latest housing report, coming in at –2.6%.  It is not as bad as last month’s –30.0%, but certainly does not point towards a housing recovery, or even a stable housing market.  Factory Orders also were below expectations, coming in at –1.2%, more than twice the loss of –0.5% expected.  Again, the vast majority of data coming in continues to be favoring MBS prices, but some big ones (Chicago PMI and ISM Manufacturing Index) were not and that is what keeps us in the wondering stage.  There are concerns about the Fed’s plans to test their exit strategy, which includes selling off their mortgage backed securities holdings, which will weigh somewhat on MBS prices.

Looking at the charts, we remain at +19bp even after the latest data released.  We may hold here until all of the data gets “digested” and the MBS market reacts.  We are right up against resistance, so more movement higher today (maybe even back off a bit) may not come.  Overall, however, while there are some concerns, the charts remain favorable for steady to improving mortgage rates at this point.

What does this mean for Florida Mortgage Rates?  Mortgage rates are edging lower today and may even edge further lower.  The short-term outlook and long-term outlook currently favor continued low mortgage rates though there are some concerns. 

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