Florida Mortgage Rate Forecast – September 3, 2010

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

Locking Stance:  LOCKING     Mortgage Bonds:  -41bp

Well, we hate to say it, but remember that you heard it here first and therealdeal.com had picked up on it last week.  What was it?  that “change is in the air”.  Our author had been predicting mortgage rates would likely begin to rise by the end of the summer (since May) and it now appears that could be the case.  It is still too early to be certain, but today’s plunge certainly is not helping mortgage rates remain low.

As we have been saying this week, today’s Jobs Jamboree would be a huge player in shaping where mortgage rates would be headed.  The Jobs Report came in as shown in the chart below:

  Actual Consensus Prior
Nonfarm Payrolls -54,000 -90,000 -131,000
Private Payrolls 67,000 40,000 71,000
Unemployment Rate 9.6% 9.6% 9.5%
Average Hourly Earnings 0.3% 0.1% 0.2%
Average Workweek 34.2 34.2 34.2

There you have it, a very unfavorable Jobs Report in regards to mortgage rates and mortgage backed securities.  With Nonfarm Payrolls coming in greater than expected, even though negative, that is hurting MBS prices, as is the fact that Private Payrolls beat expectations even though they dropped compared to last month.  The other negative is that Average Hourly Earnings rose greater than expected and that adds some to the inflationary fears, but it does help combat deflationary fears, so it is essentially a wash right now.  The salvation from complete breakdown in MBS prices is that the ISM Non-Manufacturing Index (ISM Services Index) came in at 51.5, below the consensus for 53.0 and down from 54.3, a very favorable report.

MBS prices plunged immediately after the report was released, but they are bouncing back after the ISM Services Index was released.  That being said, they will likely bounce around the remainder of the day as traders close out positions they do not want to hold over the weekend.  The important things to note on the charts are that MBS prices are now trading below their 25-day moving average for the first time since April and we have a very negative crossover on stochastic indications.  The FNMA 4.0% mortgage bond does not look as bad as the FNMA 3.5% mortgage bond, but it still does not look good. 

What does this mean for Florida Mortgage Rates?  Mortgage rates continue to edge higher and are now looking like the trend may very well be broken and mortgage rates may be on the verge of a steady climb, if not just holding steady.  The risk/reward ratio is obviously unfavorable at this time.

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