The Phoenix Real Estate Advisor

Election day is turning out to be a great day for both bonds (MBS up 90 bps currently) and stocks (DIJA up 202 currently).  Mortgage rates are possibly at the beginning of the rally we talked about last week.  So far rates have improved by .25% today on 30 yr fixed with no stopping in sight.  I will be sure to keep you posted as the higher rates may have been keeping the “on the fencers” on the wrong side of the fence. 

I would invite you to also listen to my recent audio podcast about the market conditions in the Phoenix, Arizona area. It also digs into the northwest valley market conditions.

Click here to listen to the podcast!

The roller coaster ride continued with the Dow Jones Industrial Average exploding up 889.35 points or 10.88% in trading today.  Much of this was due to stocks being on clearance and in anticipation of a possible .75% rate cut by the Fed tomorrow.  A .5% cut is virtually guaranteed and some expect a larger cut that would take the target rate under 1% for the first time. 

As we have talked about in the past, often times money will flow into stocks and out of bonds and vice versa.  The price and demand of mortgage backed bonds on Wall Street is the ONLY thing that moves long term mortgage rates.  So right now, mortgage rates are being pounded a bit.  However, if we see a dramatic cut in the Fed Funds Rate tomorrow you can bet  at some point we will see investors begin to move back into mortgage back securities (MBS’s).  The result for MBS’s could very well be a nice rally, higher yields and most importantly lower 30 year fixed mortgage rates.   Stay tuned!

Take a peek at the chart below showing daily activity over a the past 3 months for Mortgage Backed Securities.  Up equals lower mortgage rates and down means….well we don’t like down J  As you can see there has been a TON of volatility as this market starts to heal.

The has indeed Fed jumped in and lowered the key lending rate by .50% pushing the Fed Funds Rate down to 1.5% and Prime to 4.5% (Prime = Fed Funds Rate + 3).  The Fed also cut the Discount Rate by .50% putting it at 1.75%.

It turns out that the global rate cut we mentioned we were hoping for in the email last night is happening.  The European Central Bank, Switzerland, Sweden, Canada and the UK have also cut.  I think that we need to give this a day or so to see what the real reaction in the markets is going to be.  Right off the bat the markets (stocks and bonds) had some major knee jerk reactions to the news.  For example bonds fell quickly to be down 120bps and within minutes were down only 41.  This from starting out the day up about 20 bps.  It is enough to make you dizzy! 

This was certainly a historically coordinated event and it will be interesting to see how it plays out in the next few days.

Jeremy A. House

Certified Mortgage Planner

480-755-1404 office or 602-435-2149 mobile/direct

Prime Lending, A Plains Capital Company

JHouse@PrimeLending.com – Email

As we head into the weekend I wanted to pass along some more good news regarding interest rates.  As we mentioned earlier in the week rates were trying to break the 200 day moving average.  If they were able to do so, and stay above that mark we could be headed toward even lower mortgage rates than what we have been seeing. 

Well, yesterday mortgage bond prices clearly busted through this level.  The 200 day moving average is currently 101.39 and mortgage bonds are trading at 101.62.  When bonds are up mortgage rates are down!  Take a look at the chart below to see the recent trend up in bond prices – it is a beautiful thing!!

I will be sure to keep you posted as the market still remains volatile and things can change on a moment’s notice.  We will always be a step ahead for you and your clients.  If you are looking for a good reason to call and reconnect with your past clients (the best referral source J  ) this is a great time!  Everyone may know someone who is looking to buy or refinance and you can be the bearer of good news. 

Brought to you by Jeremy House for the Vison Lending Group!

602.435.2149 or Jhouse@primelending.com

From my favorite lender, Jeremy House at The Vision Lending Group!

We are seeing some continued relief in the mortgage bond market and as a result interest rates are working themselves down.  Since August 6th bonds have seen an increase of 181 basis points!!  That has resulted in 30 year fixed rates declining approximately .5%.  Much of this is due to several officials commenting positively on inflation and some easement in gas prices.  The reduction in gas prices has started to relieve overall inflationary fears. 

Strange as it may sound, the uncertainty of the overall health of Fannie and Freddie has also helped bond prices increase and mortgage interest rates decrease.  What happened here is a good old “flight to quality.”  When a company as large as Fannie or Freddie is flirting with trouble, its stock becomes a bit less attractive to traders.  As a measure of security traders will shift their money over into the bond market to protect their investment.  The same happens in reverse – if the bond market is struggling you will often see the stock market feed off of that as traders shift their capital over to stocks to reduce their losses in the bond market. 

The talk at the latest Fed meeting included hints of a FFR hike in the distant future – yet another plus!  It shows that our Fed is at least thinking about and is contemplating a solution to our “inflation situation.” 

All of this and more is adding up to better – LOWER – mortgage interest rates. 

To contact Jeremy House for more information email him at JHouse@PrimeLending.com