Maureen Megowan's Blog

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Interest rates remain level

Interest rates continue to move upwards.The following are excerpts from the newsletter on interest rates published by HSH Associates :

" Will they or won't they? If so, how soon, and how quickly or slowly? Ultimately, what does it mean for the housing market, including sales and prices? These are the questions we've been asked and have been asking since way back in late May of this year, when Federal Reserve Chairman Ben Bernanke first intimated that there would be an end to the Fed's extraordinary QE policies.

We may get some, none or even all of those answers as soon as next Wednesday, when the Federal Reserve's policy setting committee meeting comes to a close. To the questions above, we'd add perhaps one: What does it mean if they choose to do nothing, at least for now?

To be honest, it's hard to know with any precision what the Fed thinks of the current situation or what it might decide to do. We can only look at the economic evidence available and try to apply it logically. One thing is for sure, mortgage rates are a whole lot higher now then when Mr. Bernanke first revealed that QEIII might be finite, after all

 

 

It seems to us that the Fed's most likely course will be to announce that a tapering process has begun. Most likely, and given that the economy is doing okay but not great, the first taper will be a "toe-in-the-water" of $5 billion dollars or so, and a message that additional tapering will fully depend upon incoming data which supports further reductions in support. If the financial markets don't convulse over the change, and if the economic data retains a warmish tenor over the intervening six-week period, than the next meeting might see a taper of perhaps $10 billion. That would be late October, and there's a lot which could happen between now and then.

If the general announcement comes as we expect it to, there should be little to no change in mortgage rates as a direct result of the Fed's move. How they characterize the potential for future moves will matter much more in that regard. However, what if the Fed chooses not to move at this meeting? Markets may interpret this as a signal that the economy is falling short of the Fed's expectations, and that it is somewhat weaker and more in need of continuing support than not. If this turns out to be the case, mortgage rates would probably decline modestly, at least for a time, but would tend to firm up again as we approach the next Fed meeting, and so on.

We head into next week at better than two-year highs for mortgage rates. The Fed will of course consider this in their deliberations, and they will no doubt take notice of the number of announced layoffs due to slowing mortgage activity. While mortgage rates do remain very favorable, at least compared against most of modern history, the fast bump in rates will take time to be overcome by growing hiring and increasing wages. However, the sluggish economy isn't throwing off much in that way, and it does appear that we will have a slow spell at the very least to wade through as we close 2013.

It's a toss up for mortgage rates next week. In addition to the Fed's decision, there are some important indicators due out, including the latest from the National Association of Homebuilders, housing starts and permits, existing home sales, CPI industrial production and more. An active week seems on tap, but we think mortgage rates will managed to hold pretty tight to present levels. Call it a movement of a couple of basis points in either direction, dependent upon the firmness of the data."

The following are interest rate quotes from Al Hermann of American California Financial:

30 Yr Fixed FHA

Rate

APR

 

       

4.100

5.416

Details

       

 

Conforming 30 Yr Fixed up to $417000

Rate

APR

 

       

4.500

4.652

Details

       

 

Conforming Jumbo 30 Yr Fixed $417001 - $625500

Rate

APR

 

       

4.750

4.896

Details

       

 

Jumbo 30 Yr. to $1.5 Mil

Rate

APR

 

       

5.125

5.264

Details

       

 

Jumbo 7/1 ARM $1.5 Mil (higher loan amt available)

Rate

APR

 

       

3.625

3.207

Details

       

 

For more information about Palos Verdes and South Bay Real Estate and buying and selling a home on the Palos Verdes Peninsula, visit my website at http://www.maureenmegowan.com . I try to make this the best real estate web blog in the South Bay Los Angeles and the Palos Verdes Peninsula. I would love to hear your comments or suggestions.

Comment balloon 2 commentsMaureen Megowan • September 13 2013 08:07PM
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