Commentary: Different day - same story.
As you are probably well aware by now -- most traders are anticipating the Fed will announce a new bond-buying program nicknamed "Operation Twist" following the conclusion of the Open Market Committee meeting this afternoon at 2:15 p.m. ET.
If the Fed does choose to launch such a program the central bank will soon begin conducting a number of special auctions where they buy longer-dated Treasury securities with proceeds derived by selling shorter-dated notes and bills. The buying and selling process would occur over the course of the same day and is intended to push long-term rates - including mortgage rates -- lower. The sources I talk to tell me the initial novelty of this fancy financial footwork may prove supportive of fractionally lower mortgage rates - but the effect will not likely last long. The moral of this story is simple and straightforward - stimulus programs - especially effective stimulus programs - almost always mark the beginning-of-the-end of a move to lower mortgage interest rates. At this juncture, there is nothing currently available to suggest things will be different this time around.
I'll provide a summary of the Fed's post-meeting statement on my website as quickly as possible following its release later today.
The mortgage market continues to find support from a growing fear Greece may default on their sovereign debt - possibly within the next couple of weeks. A significant amount of international capital has elected to flee European and other global markets for the relative safe-haven of dollar-denominated assets like Treasury debt obligations and mortgage-backed securities. This so-called "flight-to-quality" flow of capital into our domestic credit markets is a condition that tends to temporarily support steady to perhaps fractionally lower mortgage interest rates.
The National Association of Realtors announced earlier today that the pace of Existing Home Sales posted a solid 7.7% gain last month. Home prices across the country are down 5.5% on a year-over-year basis - a condition which drove bargain hunters into the market. Sales to investors accounted for 22% of the overall gain in the pace of August existing home sales, compared with 18% in July. Until job growth shows notable and sustained improvement -- the housing sector activity will likely continue to wallow near multi-decade lows.
As they do every Wednesday, the Mortgage Bankers of America have released their Mortgage Application Survey figures for the week ended 9/16/11. Overall mortgage application activity rose a very modest 0.6% last week. Refinance requests accounted for all of the gain with a 2.2% increase as homeowners continue to take advantage of record low mortgage rates. The number of applications taken for the purchase of a home fell 4.7%.
The contract rate for 30-year fixed-rate conforming mortgages finished the week at 4.29%, unchanged from a week ago, down 7 basis-points from four weeks ago, and down 31 basis-points from the year-ago mark. Refinance requests accounted for 8 out of every 10 loan applications taken last week.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
