Wow! Mortgage Bonds and therefore San Diego Mortgage Rates, did not have a good week this last week. Since May 1st, mortgage bonds have dropped an astounding 825 basis points, which has never been seen before. In just the last 3 days of the week mortgage bonds lost 347 basis points alone. What caused this market shift last week?
After the Federal Open Market Committee meeting last week, the Federal Reserve released its Policy Statement. They noted that the downside risks for the economy and labor market have diminished. All eyes were looking to see if there was any mention of tapering their Bond Purchase program known as Quantitative Easing. There was not.
However, the press conference that followed was a different situation. Fed Chairman Ben Bernanke said, “Assuming the economy and labor conditions evolve as the Committee expects, the Fed anticipated it would begin tapering later this year and to finish by mid-2014.” This mixed message caused a huge sell-off in both Stocks and Bonds, increasing the volatility the markets have seen of late.
There was more good news in the housing market as Existing Home Sales rose by 5.18 million units annualized in May. This report showed an increase of 12.9 percent from May 2012 and the highest rate since November 2009. Housing Starts also rose by 7 percent in May. Even though the number came in lower than expected, it was actually up a whopping 28 percent since May 2012.
There was also some good news for the manufacturing sector, as both the Philadelphia Fed Index and the New York State Empire Manufacturing Index came in well above expectations. And inflation at the consumer level remains tame.
How did this affect San Diego Mortgage Rates?
The Federal Reserve’s Bond purchase program has helped Bonds and San Diego Mortgage Rates remain attractive. However, just the chatter of potentially tapering the purchases has led to increased volatility in the markets, causing Mortgage Bonds and Mortgage Rates to worsen by about 1% in the last month and a half. Strong economic news has also added to the sell-off in Mortgage Bonds, as investors have tried to take advantage of the gains.
On Friday, I updated a quoted for a client on a 30 year fixed for a home purchase of $425,000. The loan to value is 95% and the credit score is 728. When I first quoted the rate a little over a month ago the rate was at 3.5% at no points. As of Friday, the rate is now 4.625% at 0 points. With the additional mortgage insurance the APR is 5.1%.
What Could Affect San Diego Mortgage Rates This Week?
The Economic reports for this week begin on Tuesday and the calendar is packed!
- The week begins and ends with the consumer’s feeling, with Tuesday’s Consumer Confidence Report and Friday’s Consumer Sentiment Index.
- In the housing sector, New Home Sales for May and the S&P Case-Shiller Home Price Index will be released on Tuesday, followed by Pending Home Sales for May on Thursday.
- Gross Domestic Product (GDP) will be released on Wednesday. GDP is considered the broadest measure of economic activity and is an important report to monitor.
- Personal Consumption Expenditures, the Fed’s favorite measure of inflation, will be reported Thursday, along with Personal Income and Personal Spending.
- As always, on Thursday, Weekly Initial Jobless Claims will be released. Last week, Initial Jobless Claims rose to 354,000, coming in above expectations.
- Ending the week is news from the manufacturing sector, with Chicago PMI.
If you are interested in getting a quote, please click HERE or feel free to give me a call at 619-312-0612. I am a San Diego Lender and I look forward to helping you secure the best San Diego Home Loan possible.