Merrill Lynch analysts announced yesterday afternoon that the recession is OVER!! While that is certainly a feel good sentiment, perhaps Merrill is overlooking all those people still out of work, or still in fear of losing their jobs? What about the forecast, just this week, that unemployment could rise as high as 13%? A survey done by Realty.com just released this week, shows that more than 50% of potential first time homebuyers are reluctant to make that purchase for fear of losing their jobs.
Nevertheless, mortgage rates are on the rise today as business earnings continue to come in at or above estimates. Retailers, in general are reporting better numbers than expected (which is what prompted Merrill's remarks). The yield on the 10 year Treasury bond rose to 3.45% yesterday, a huge jump over the close Monday at 3.34%. Today the yield jumped to 3.61%, so yes, mortgage rates are definitely on the rise again! We have had several rate increases already today.
Last night, Intel reported much better than expected earnings, which has led to a huge stock market rally today. Intel earnings are considered very significant because they portend the trend in technology buying, which, of course, is very good news for the economy. In addition, there was some positive news about on orders and shipments in the manufacturing index, the first positive news we've seen in this sector is quite some time. The DOW closed up 256 points, while the NASDAQ closed up 63 points. The S & P crossed a critical point of resistance at 925 to close at 933.
At the same time, global confidence continues to drop to new lows as unemployment is surging worldwide. (Are you listening Merrill?) Government stimulus efforts are doing little to reduce unemployment as most of the stimulus dollars have yet to move into those "shovel ready" jobs out there. But, here's a green shoot for you...combined sales of both existing and new construction homes increased in May for the 4th straight month. Perhaps the housing market really is bottoming out finally at least nationally, even if we're not feeling it as much here in Portland.
So, are we in for another round of gains on the stock market, leading to ever higher mortgage rates? Mortgage applications were up the last two weeks, but then rates had dropped again. Currently, 30 year fixed rate mortgages are above 5%** again, though some lenders do still have ARM loans below 5%**. That still remains to be seen, as many of the "bellwethers" of the market have yet to report earnings. Any really bad earnings reports in the next week or so, could send the stock market tumbling again, with bond yields and mortgage rates dropping in tandem. As always, I'll keep you posted as news unwinds. In the meantime, mortgage rates in the 5% range are still very good rates, historically speaking. We all want to see those rates in the 4% range, but is that realistic long term? I'd love to hear your comments.
Warm regards,
Shelby Bateson
Town & Country Mortgage
503-819-6545 phone
Lic # ML-3604
http://www.shelbytncmortgage.com
* Best rates apply to borrowers with Loan to Value at or below 90% and credit scores of 740+. ** Best FHA rates apply to credit scores of 660 and up. There are upward rate adjustments for lower credit scores on all loan programs. All rates are subject to change without notice. These rates are NOT APRs - do not include closing costs.
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