Commentary: Different day - same story.
For the time being mortgage investors appear content to tread water as they await Fed Chairman Bernanke's 1:00 p.m. ET speech on Thursday and President Obama's address to a joint session of congress at 7:00 p.m. ET the same day. Until then, the mortgage market will probably take directional cues from trading action in the stock markets. Higher stock prices will tend to push mortgage note rates fractionally higher while lower stock prices will likely prove supportive of steady to perhaps slightly lower rates.
Yesterday I wrote, "For what it is worth, my models are indicating the Dow Jones Industrial Average (a price-weighted average of 30 actively traded, primarily blue chip industrial stocks, considered to be an indicator of overall stock market conditions) will attempt to put in a short-term bottom somewhere in a price range between 11,040 to 10,950. This bottom, according to my models, will likely be made sometime between today and the close of business on Friday. If this assessment proves anywhere close to accurate, it will be difficult, if not impossible for mortgage note rates to move significantly lower from current levels."
The intraday low for the Dow Jones Industrial Average was 10,932 yesterday morning -- and the index has since rallied 400+ points. I expect a price pull-back toward the 11,000 level to occur within the next day or two. If buyers aggressively show up as the DJIA trades at, or near the 11,000 mark -- the probabilities will favor a rally in the stock market lasting through mid-October that has the potential to carry the price of the Dow all the way back to the neighborhood of 12,800 or so. I'll be watching closely. Should this scenario actually develop - the lowest mortgage interest rates of the year will likely have been set during the week ended August 19th.
Speaking of mortgage interest rates - the Mortgage Bankers of America have released their Mortgage Application Survey for the week of September 2nd. The total number of mortgage applications taken during the period fell 4.9%. Despite lower mortgage rates, the refinance component of the index dropped 6.3% while the pace of purchase applications increased a very modest 0.2%.
The contract rate of 30-year fixed-rate mortgages finished the week at 4.23%, down 9 basis-points from a week ago, down 14 basis-points from four weeks ago, and down by 27 basis-points from the year-ago mark. Refinance applications 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
