December 16th, 2008 10:50 AM by Lehel Szucs
Tuesday's bond market has opened relatively flat despite weaker than expected economic news. The stock markets are showing sizable gains with the Dow up 115 points and the Nasdaq up 39 points. The bond market is currently up 3/32, but we will still see an increase in this morning's mortgage pricing of approximately .250 of a discount point.
The Labor Department gave us today's big news with the release of November's Consumer Price Index (CPI). They reported that the overall index reading fell 1.7% last month. This was a larger drop than was expected and the largest monthly decline since February 1947, indicating that prices for energy are still falling rapidly. The core data reading, that excludes volatile food and energy prices, was unchanged last month. Analysts were expecting to see a slight increase in the core reading. This means that prices at the consumer level of the economy were lower than expected, which is good news for bonds and mortgage rate s because falling prices means inflation is not really a threat.
November's Housing Starts was also posted this morning and also showed a record low. It revealed a decline in starts of new homes of nearly 19% and a drop of 15% in permits for new construction starts. This means that the housing sector is still weakening and appears to be well off a "bottom" that people are trying to predict.
We also have today's FOMC meeting to be concerned with. It will adjourn at 2:15 PM ET today and will likely affect afternoon trading and mortgage rates. The general consensus is that another rate cut is coming. Some think that the Fed will reduce key short-term interest rates by another .750 of a discount point, but most think the Fed will make a half-point move and wait until early next year before making another change. The post meeting statement also may a significant influence on the markets and mortgage rates as investors look for any indication of what and w hen the Fed may do next.
Look for an update to this report after the markets have had an opportunity to react to the meeting results.
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