The following is a guest blog from Jeffrey Heckman and Joanne Rotella with Shelter Mortgage Company and does not necessarily reflect the views of GeorgiaMoves.com
The Shelter Six
1. The recent mortgage rate surge began following a stronger than expected Employment Report released on the third of May. The logic behind the rise was that when the job market strengthens, the Fed no longer needs to manipulate rates down to such a low level.
2. Rates continued to rise following comments by Fed Chairman Ben Bernanke on June 19 indicating that the Fed would probably stop buying bonds sooner than expected. This bond buying program has been the #1 reason rates have been so low for so long. Since the June 19 meeting, there has been a great deal of uncertainty about when the Fed will actually begin to tighten monetary policy. The result has been tremendous volatility with rates sometimes changing two or three times a day. Not fun!
3. Another stronger-than-expected Employment Report released on July 5 frightened investors greatly and rates again increased swiftly spiking to the highest level in quite some time.
4. Thankfully, the sentiment has reversed somewhat this week, mostly due to a speech late Wednesday by Bernanke. The Fed Chief strongly stated that Fed officials feel that “highly accommodative” monetary policy will be appropriate for a long time. Bernanke’s comments soothed investors, causing stocks to rise and mortgage rates to finally drop back a bit.
5. As mortgage rates have pushed higher, so has the ever-so-resilient stock market with the Dow reaching yet another record high. At some point, many think the stock market will drop back. If this happens, rates will most likely push lower as money will probably be transferred into the bond market.
6. Bernanke is scheduled to deliver the Federal Reserve’s semi-annual report on monetary policy to the House Banking Committee Wednesday and to the Senate on Thursday. The report is one of the most important speeches given by the Fed Chairman each year. Senator Hubert Humphrey and Representative Augustus Hawkins originally sponsored the legislation in 1977 and the report is thus known as the Humphrey-Hawkins Report. There is the potential for market volatility anytime Fed Chairman Bernanke speaks and even much more so at this time of uncertainty. The testimony starts Wednesday morning and continues Thursday. Exactly what rates will do is unknown, even to Bernanke. Therefore, a cautious approach to lock decisions is wise at this time.
The primary influence on mortgage rates this past week was shifting expectations for Fed policy. Fed Chief Bernanke eased investor concerns about tighter monetary policy, causing mortgage rates to end the week lower, reversing a good portion of the prior week’s increase. her. The benchmark Conforming 30 year fixed-rate is now approximately 4.5%.
Next week, Retail Sales will be released on Monday. Retail Sales account for about 70% of economic activity. CPI will come out on Tuesday, along with Industrial Production. The Consumer Price Index (CPI), the most closely watched monthly inflation report, looks at the price change for those finished goods which are sold to consumers. Housing Starts and the Fed’s Beige Book will be released on Wednesday. Philly Fed, Empire State, and Leading Indicators will round out the schedule. Investors also will be paying close attention to Bernanke’s comments on Wed and Thur.
For more information or to get pre-qualified for a mortgage, please contact Jeffrey Heckman with Shelter Mortgage Company at 404-277-6044 or [email protected] or Joanne Rotella at 404-290-4800 or [email protected]