Florida Mortgage Rate Forecast – July 15, 2010

by Florida's #1 Mortgage Planner on July 15, 2010

Locking Stance:  CAUTIOUSLY FLOATING     Mortgage Bonds: +28bp

Mortgage backed securities held on to most of their gains yesterday and in t closing stretch they managed to close above the 10-day moving average.  As a result, the risk/reward ratio is now tilted in favor of floating again and the charts are painting a better picture, of course.  As you can see above, MBS prices continue to make gains this morning on the heels of more favorable data.

There are a number of reasons for today’s marked improvement.  Starting things off, inflation at the producer level was tame as the Producer Price Index (PPI) came in at –0.5% versus the –0.1% expected though Core PPI was inline at 0.1%.  Next up was the Empire State Manufacturing Survey which came in well below expectations with a 5.08 versus 18.0 reported.  Jobless Claims were reported better than expected at 429K versus 445K and that brought the 4-week moving average down to 455.25K, though it is still high.  Industrial Production was reported at 0.1%, higher then the –0.2% expected and Capacity Utilization was slightly higher than expected at 74.1%.  And the final bit of market-moving data was the Philadelphia Fed Survey which also was well below expectations, coming in at 5.1 versus 12.0.  Hey, but don’t worry since Ben Bernanke and Obama, along with some others, state that the markets are overreacting to the data and that the data is not portraying reality.   For those of us in the real world, however, the data points to a weakening economy, though it is still growing at the moment.  The good news is that this bad economic news sends money into “safe” investments and that drives MBS prices higher and lower mortgage rates.

Looking at the charts, we appear to be remaining in the sideways trading pattern and are now back to the top portion of that range.  I changed my stance for now, somewhat reluctantly, as momentum is favorable at the moment and with Stochastic indications out of the overbought spectrum, there is a potential to breakout to the high side.  Remember that the charts are still a little skewed from the earlier monthly mortgage bond coupon rollover and today’s move actually should be sending mortgage rates to new lows (may only be pricing wise), though very slightly.

What does this mean for Florida Mortgage Rates?  Mortgage rates are pushing lower still and pricing should be a new lows if they hold on today.  The risk/reward ratio is favorable for floating, but there are still some concerns and things can change quickly, so be ready just in case.

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