06
Oct
09

Rat Prediction. Er I mean Rate Prediction.

In an earlier newsletter I predicted we’d see a rate drop in October leading through November.  So far, I’m right, with 30 year rates hitting 4.50% for conforming loans.

But the other shoe has yet to drop, that of the Fed making an announcement to purchase still more Mortgage Backed Securities beyond the October 30 deadline.

The Fed didn’t do exactly that but they kinda sorta came close by stating that they were not canceling their purchases as many had speculated.  On the contrary, they settled the markets by not only reiterating their position on purchases but extending the time frame that they’ll continue to invest in mortgage-backs until early next year.

This means that rates should stay at current levels for at least this quarter.

What could mess up this prediction?

It appears much attention has been given the “recovery” in terms of the unemployment reports.  The September payroll numbers were worse than expected and with all the relatively good news on the jobs front in August’s report it appears August was an anomaly.

If however the October payroll reports look more like August than September then we’ll see rates move back up into the low five percent range fairly quickly.

Inflation is also tame but when, not if, inflation does hit the streets mortgage rates will shoot up and will never look back.

When will that happen?  I can’t predict any date but you can’t keep printing money like we’re doing now and in the future without rates moving up.

That’s just a fact.

David
512-924-6076

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