Your Nashville, Franklin and Brentwood Tennesee real estate and homes for sale source! "THE WORLD IS BUT A PERPETUAL SEE-SAW." Michel de Montaigne. And that sentiment was especially true in the world of Stocks and Bonds last week, as money see-sawed back and forth between the two markets, halting the improvement that Bonds and home loan rates mustered up in the first part of the week. Bonds and home loan rates began the week looking good - and remembering that inflation is bad news for both Bonds and rates, they were helped along by good news on the inflation front. Inflation at the wholesale or producer level remained tame in May, and at a consumer level, inflation readings came in lower than expected, with a year-over-year reading at its lowest level since 1950. These are good signs that inflation hasn't become an issue yet. However, inflation will be a concern down the road, due to the massive stimulus being injected into the economy. It is said that rates are like a boat floating atop the sea of inflation...as inflation rises, so will home loan rates. If you or someone you know should be acting on today's still low home loan rates, please get in touch soon. Also helping Bonds rally in the early part of last week was the fact that the New York State manufacturing index came in weaker than estimates, indicating that the US economy is still very weak. And since bad economic news often causes money to flow from Stocks into Bonds, this piece of news helped Bonds start the week on an improving trend. However, Bonds and home loan rates reversed course midweek and worsened, as money see-sawed back over to Stocks. They were also pressured to worsen by the enormous amount of Bond supply hitting the markets - as too much supply of anything will naturally cause the price to move lower...and in this case, has caused home loan rates to move higher. As you can see in the chart below, Bonds have worsened when additional supply has been announced, causing home loan rates to climb.
Chart: Fannie Mae 4.5% Mortgage Bond
 While the Fed is continuing to purchase Mortgage Backed Securities, their efforts are just not enough to absorb the flood of new closed and securitized mortgages that are hitting the market after the heavy refinance activity recently - not to mention all the Treasury Securities being auctioned in order to pay for all the stimulus plans. And speaking of activity in the housing market, Housing Starts rose a whopping 17% in May to come in better than expectations. In addition, Building Permits, which are a sign of future construction, also came in better than expected. These are good signs that the affordable home prices, tax incentives and low home loan rates are attracting buyers to the market. After all the see-sawing action back and forth last week, including a late week rally in Bonds and fizzle in Stocks, home loan rates ended the week slightly higher than where they began. THERE CAN BE PLENTY OF UPS AND DOWNS WHEN IT COMES TO BUYING A HOME. CHECK OUT THIS WEEK'S SPECIAL MORTGAGE MARKET VIDEO VIEW FOR IMPORTANT INFORMATION THAT WILL HELP EASE THE PROCESS. |