Strong Housing Market Cause Increase In Mortgage Rates 3-21-2018

By James Brooks

The bond market is down 4/32 (2.91%), which should push Raleigh Area mortgage rates to increase by approximately .125 of a discount point.

The National Association of Realtors gave us today?s only relevant economic data, announcing that home resales rose 3.0% last month. This was a larger increase than what analysts were expecting, meaning the housing sector may be stronger than thought. That by theory, is bad news for the bond and mortgage markets. However, the data hasn?t had much of an impact on today?s mortgage pricing.

Focus is on this afternoon?s highly important Fed events. They start with the adjournment of the FOMC meeting at 2:00 PM ET. There is a pretty wide consensus that new Fed Chairman Jerome Powell and friends will raise key short-term rates by a quarter point at this meeting. Since the move won?t come as much of a surprise if they do act, market participants will be focused on the Fed?s timetable for future rate hikes. The markets are currently expecting them to make three bumps this year, including this week?s. If the post-meeting statement gives any hints of a fourth rate hike this year, expect the bond market to react negatively and mortgage rates to spike higher. I believe there is some concern in the markets that this will happen. Therefore, if three hikes is reiterated, we could see an afternoon rally in bonds that leads to lower mortgage rates.

Along with the meeting adjournment will come the Fed's updated economic projections. They may reveal predictions for stronger economic activity than the last update. Then we will get the press conference by Chairman Powell at 2:30 PM, his first as head of the Fed. There is a high probability of seeing an active afternoon in the financial and mortgage markets, so please proceed cautiously if still floating an interest rate.

Look for an update to this report shortly after the markets have an opportunity to react to this afternoon?s activities. There are a couple of minor economic releases tomorrow, neither of which are likely to draw much attention. They will be addressed in this afternoon?s update.

If I were considering financing/refinancing a home, I would.... Lock if my closing was taking place within 7 days... Lock if my closing was taking place between 8 and 20 days... Float if my closing was taking place between 21 and 60 days... Float if my closing was taking place over 60 days from now.

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