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Rate Update

Mortgage rates continue to improve following last Monday’s abrupt move higher amid criticism of the Federal Reserve’s “Quantitative Easing II” plan to stimulate growth and concern that a swelling US deficit will lead to higher borrowing costs. The NY Fed President defended the strategy and encouraged foreign investment by stating that the central bank’s bond purchases won’t cause an inflation problem. On Tuesday and Wednesday, banks and investors in Asia shifted cash into Treasuries, long seen as the world’s safest investment. The monthly inflation reports showed there is no concern in the short-term as the Core Producer Price Index (excluding food and energy volatility) was down 0.6% from last month and the Core Consumer Price Index was unchanged. There were other encouraging signs for the slowly recovering US economy. The Index of US Leading Economic Indicators rose for a fourth consecutive month, the Philadelphia Fed survey showed manufacturing surged regionally and Jobless Claims climbed less than forecast, up only 2K to 439K. Residential real estate still seems to be a drag on the economy, but builders are hopeful for a Spring rebound. Housing Starts were down almost 12% but Building Permits were up 0.5%. Existing Home Sales in California fell 20.9% in October compared to one year ago. The median home price of $256K also was down 3.4% from September and down 0.4% from October 2009. It’s the first year-over-year decline in 12 months. San Luis Obispo County saw similar numbers with sales down 10.1% and prices down 1.8% from one year ago. Currently, the 30 Year Fixed is 4.125% (4.267% APR) and the 15 Year Fixed is 3.375% (3.623% APR). This will be a short week for economic data thanks to the Thanksgiving holiday. Wednesday is the busiest day with Durable Goods Orders, New Home Sales, Personal Income, Consumer Sentiment and Jobless Claims.

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