October 24th, 2008 1:21 PM by Lehel Szucs
Friday's bond market opened in positive territory following early stock weakness. The stock markets are continuing their downward spiral with the Dow down 300 points and the Nasdaq down 40 points. The bond market is currently up 20/32, but we will still see an increase in this morning's mortgage rates of approximately .250 - .375 of a discount point due to weakness late yesterday.
The only economic news released today was September's Existing Home Sales data from the National Association of Realtors. They reported an increase of over 5% in home resales last month when the report was expected to show an increase of approximately 1%. This means that sales activity was stronger than expected last month. That can be considered a negative for bonds and mortgage rates, but the market seems to be giving that data little weight.
The recent rapid improvement in bonds has me concerned that we may see profit taking by traders that could push mortgage rates higher. It appears that there is no consensus in the markets regarding whether or not this is the bottom for the stock markets. It seems there is still room for the major indexes to fall further, but this may not necessarily mean that rates will improve as a result, indicating that the risk versus reward factor of continuing to float an interest rate is leaning heavily to the risk side in my opinion. Accordingly, please maintain constant contact with your mortgage professional if you have not locked an interest rate yet.
Next week is packed with economic releases along with the next FOMC meeting. The first data comes Monday when we will get New Homes Sales for September. This is the sister report to today's Existing Home Sales release and is also not considered to be of much importance to the markets. It is next week's least important report.
The rest of the week brings us important reports every day. There is another FOMC meeting that adjourns W ednesday afternoon that will likely lead to plenty of volatility in the markets. Look for details on next week's data and events in Sunday's weekly preview.
If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now... This is only my opinion of what I would do if I were financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
©Mortgage Commentary 2008