Daily Commentary by Larry Baer: The swoon in the mortgage market has been created by investors' reaction to yesterday's post-meeting statement issued at the conclusion of the Federal Open Market Committee meeting. The members of the committee said they expect "moderate" economic growth over coming quarters along with a gradual decline in the unemployment rate. At its previous policy meeting in January, the Fed has said it expected "modest" growth. While the Fed did acknowledge some improvement in the labor market, they left the door open to the possibility of launching another monetary stimulus program - to be known as "QE3" - and said they continue to expect to hold their benchmark short-term interest rates near zero through late 2014.
In my judgment mortgage investors have gotten ahead of themselves with the heavy round of selling of the past two days. Most of the selling is probably due to investors adjusting strategies as the prospects of additional mortgage-backed security purchases by the Fed as part of a "QE3" stimulus plan sometime later this year dims a bit.
Looking ahead -- there are high implementation risks to the Greek financial rescue effort currently underway and there are many analysts who believe the pace of economic growth is due to slow noticeably this spring. Another round of threatening news from the euro-zone and a slowing pace of economic growth here at home will take the glitter off of the current rally in the stock market rather quickly -- a condition, should it develop - almost sure to benefit the prospects of steady to perhaps fractionally lower mortgage interest rates.
The Mortgage Bankers of America have released their Mortgage Application Survey for the week ended March 9th. The MBA data shows overall loan demand declined by 2.4% on a week-over-week basis - a decline driven by another drop in the refinance index. The refinance index fell 4.1% from the previous week while the number of applications taken for a home purchase increased 4.4%. Three-out-of-four mortgage applications taken last week were refinance requests.
The contract rate for 30-year fixed rate agency eligible mortgages finished at 4.06%, unchanged from the prior week, down 2 basis-points from four weeks ago, and down 89 basis-points from this time one year ago.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
