Rate Update

Dismal housing data last week alarmed investors and tempered optimism of a rapid economic recovery, leading mortgage rates to their LOWEST LEVELS OF ALL-TIME! Existing Home Sales unexpectedly decreased 2.2% in May, although the median price is up 2.7% from one year ago. The number of previously owned homes on the market inched up to a little more than 8 months of inventory, but economists continue to worry about the looming “shadow inventory”. Even more alarming, New Home Sales plunged 32.7% in May to the lowest level on record after the April 30th homebuyer tax credit expiration. New home sales were down 53.2% in the West region, and sales have now sunk 78% from their peak five years ago. Year-over-year, the median price of a new home has decreased 9.6% to $201,000. The Fed met last week, and held the benchmark rate at a record low zero to 0.25% and continued to utilize the “extended period” language when characterizing the length of time that the “exceptionally low levels” will be warranted. Fed officials also incorporated a more pessimistic tone for their economic outlook, stating “financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad.” The press is renewing discussions of a “double dip” in the economy despite only three double-dips in the last 160 years of US business cycles. Regardless, these developments in the housing market kept investors focused on the relative safety of Treasury debt and mortgage-backed securities. Currently, the 30-Year Fixed sits at 4.250% (4.398% APR) and the 15-Year Fixed is at 3.750% (4.012% APR). This week we will see the S&P/Case-Shiller Home Price Index, Pending Home Sales, Consumer Confidence and the very important employment report.