Is the Writing on the Wall?

Is the Writing on the Wall?

Talking heads (small “t”, small “h”, not David Byrne, et al.) talk. A lot. It is truly hard to keep up with what they say, whether it is consistent with what they said before and what they might say in the future. To be specific, let’s talk about the debt ceiling, S&P’s downgrade of US debt, downgrade of Fannie and Freddie and how they apply to mortgage rates. What? You thought I was going to talk about how all this affects my running or choice of pizza topping (mushrooms, spinach, onions, veggies, mmm). Here’s what we were told: if Congress fails to reach a debt ceiling deal, US debt will be downgraded. Then we were told, “even if” a debt ceiling deal was reached, there would still be a downgrade. Hmm, that second one was right. Then we were told that if we got the downgrade, this would raise interest rates on US Treasury bills and that the higher rates would work their way into the US economy. (Look at the photo. Rates going up was the writing on the wall. Today the market cleaned that wall. Also, that’s the worldwide headquarters of Perl Mortgage in the photo). That may happen, but it didn’t happen today.

Today, the Dow Jones Insustrial Average got clobbered. Traders sold enough shares to knock the Dow by over 5%. To use the age old metaphor, the Bears were loose on Wall Street. But, a funny thing happened. As stocks were sold, traders bought bonds. The yield (interest rate) on bonds went down today. Remember as bond prices increase, which they do when there are buyers (supply, demand, you get it), the yield goes down. Why? Well when no one wants to borrow your money (buy your bonds), you have to give a higher rate to entice them to buy. When your bonds are the proverbial “it” girl and everyone wants them (her), the price goes up (too many dollars chasing too few goods) and the yield (rate) goes down. Today, there were buyers, lots of them, and rates went down. Hmmm.

Now, mortgage rates are another animal. Those rates were pretty much flat from Friday. I like to read a site called Mortgages News Daily or MND. MND reported today that:

The BestExecution 30-year fixed mortgage rate is 4.250%. Not many lenders are willing to offer 4.00% but 4.125% is available if you’re willing to pay additional closing costs. On FHA/VA 30 year fixed BestExecution is 4.00%. Fewer lenders willing to quote 3.875% (includes additional closing costs). 15 year fixed conventional loans are still best priced at 3.75% and we’re still seeing aggressive quotes at 3.625%. Five year ARMs are still best priced at 3.25. ARMs and 15 year quotes seem to have bottomed out.

This report is pretty consistent with what I am seeing. If these sound like things you would like to see, give me a call, 847-920-8030.

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