Your Lake of the Ozarks Mortgage Lender: Harsh Winter Weather May Cause the Feds to Increase Purchases of Mortgage Bonds

Monday, February 24, 2014

Harsh Winter Weather May Cause the Feds to Increase Purchases of Mortgage Bonds

"Winter is coming." George R.R. Martin. Winter has long arrived in many parts of the country, and it is being cited as a reason for several weaker than expected economic reports. Read on for details, and what they mean for home loan rates.

After making important improvements last year, the housing sector has struggled of late. January Housing Starts declined by 16 percent from December, and have been declining since November's annual rate of 1.101 million, which was the highest since 2008. Building Permits, a sign of future construction, also fell 5 percent in January from December, while Existing Home Sales declined by 5.1 percent.

In addition, the National Association of Home Builders Housing Market Index came in at 46, the lowest reading since last May. Readings over 50 indicate that more builders view conditions as good, rather than poor. The NAHB said that weather conditions across the country led to a decline in buyer traffic last month.

In the manufacturing sector, both the Empire State Manufacturing Index and the Philadelphia Fed Index fell in February, coming in well below expectations. The labor market is also struggling, as Weekly Initial Jobless Claims came in at 336,000 and continue to hover around this number. Meanwhile, inflation at both the consumer and wholesale level remains tame.

What does this mean for home loan rates? Remember that the Fed is now purchasing $35 billion in Treasuries and $30 billion in Mortgage Bonds (the type of Bonds on which home loan rates are based) to help stimulate the economy and housing market. This is down from the original $85 billion per month that the Fed had been purchasing. The minutes from the Fed's recent meeting of the Federal Open Market Committee revealed a lack of consensus on this topic. If economic data continues to be weak, the Fed may have to rethink the tapering it has begun. This will be a key story that could impact the markets and home loan rates in the weeks and months to come.

The bottom line is that now remains a great time to consider a home purchase or refinance, as home loan rates remain attractive compared to historical levels. Let me know if I can answer any questions at all for you or your clients.

I would love the opportunity to help you manage your Lake of the Ozarks Mortgage Loan or refinance. Give me a call at (573) 746-7211 or send me an email at mlasson@fsbfinancial.com with any questions you may have!!