Florida Mortgage Rates – Morning Report

by Florida's #1 Mortgage Planner on October 20, 2009

Locking Stance:  LOCKING    Mortgage Bonds: +25bp

Mortgage backed securities are obviously in a “rally” mode today, but don’t get excited yet.  Remember that I have been talking about a retracement for a few days now, and there is no reason to even start to get excited until MBS pricing is at least above their 10-day moving average.  You see, a 50% retracement, the typical minimum amount, is based on MBS pricing reaching 101.18, about 6 basis points above the 10-day moving average.  That means we should see a “test” of the 10-day MA, even getting above it, before the next leg down is likely to begin.

OK, enough techno-babble.  Wondering why MBS prices are up right now?  Data.

Housing Starts were released this morning and were worse than expected.  No surprise there as the $8,000 incentive credit is coming to an end and now NAR, among many others, are begging for an extension.  Really, it is rather disgusting to watch.  But just how bad were the numbers.  While expectations were for 615K, the 590K number is only slightly lower than the prior 598K.  As for Building Permits, well they were 573K, down slightly from the prior 579K.  Now what is really helping mortgage bonds today is the Producer Price Index, or PPI.  PPI was below expectations at both levels with overall PPI at –0.6% (versus –0.3%) and at –4.7% year over year and the Core PPI was –0.1% (versus 0.1%) with the year over year at 1.8%.  These numbers present inflation as being under control still and that is good news for MBS prices.

What does this mean for Florida Mortgage Rates?  The short-term tick lower in mortgage rates is likely coming to an end and the next leg higher may be about to start.  Over the next few days, the picture may change, but the trend still favors higher mortgage rates.

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