As the new year begins, there are no shortage of stories telling us what to expect in 2012. Housing finished 2011 with momentum and mortgage rates closed at the lowest rates of all time.

Some expect those trends to continue through the first quarter and beyond. Others expect a rapid reversal.

Who’s right and who’s wrong? A quick look through the newspapers, websites and business television programs reveals “experts” with opposing, well-delivered arguments views. It’s tough to know who to believe.

For example, here are some “on-the-record” predictions for 2012 :

• Home prices will rise in 2012 (says Freddie Mac)
• Home prices will fall in 2012 (says CBS News)
• Mortgage rates will rise in 2012 (says American Banker) 
• Mortgage rates will fall in 2012 (ays the LA Times)

The issue for buyers, seller, and would-be refinancers in Gig Harbor and nationwide is that it can be a challenge to separate a “prediction” from fact at times. 

When an argument is made on the pages of a respected newspaper or website, or is presented on CNBC or Bloomberg by a well-dressed, well-spoken industry insider, we’re inclined to believe what we read and hear.

This is human nature.

However, we must force ourselves to remember that any analysis about the future — whether it’s housing-related, mortgage-related, or something else — are based on a combination of past events and personal opinion.

Predictions are guesses about what might come next — nothing more.

For example, at the start of 2009, few people expected the 30-year fixed rate mortgage to stay below 6 percent, but it did. Then, at the start of 2010, few people expected the 30-year fixed rate mortgage to stay below 5 percent, but it did.

All we can know for certain about today’s market is that both mortgage rates and home values are low, creating favorable home-buying conditions in and around Magnolia and nationwide.

At that start of last year, few people expected mortgage rates to even reach 4 percent. Today, rates “with points” price in the 3s.

What 2012 has in store we just can’t know.

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Despite the lowest mortgage rates of all-time, home buyers are slowing the pace at which they’re buying homes.

According to the National Association of REALTORS®, on a seasonally-adjusted basis, the Pending Home Sales Index fell 1 percent in August.

The Pending Home Sales Index measures homes under contract, but not yet sold, nationwide. In this respect, the Pending Home Sales Index is a forward-looking housing market indicator; a predictor of future home sales.

It’s one of the few national indices that “looks ahead” to future market conditions. Most housing data, by contrast, describes past events.

On a regional basis, only the South Region showed improvement in August’s Pending Home Sales Index report : 

• Northeast Region: -5.8%
• Midwest Region : -3.7%
• South Region : +2.6%
• West Region : -2.4%

That said, even the value of regional data can be questioned. Like all things in real estate, the number of homes going under contract will vary on the local level.

For example, in the Northeast Region where pending home sales slipped in August, there are close to a dozen states. Some of those states performed better than others, and there is no doubt that cities and towns exist in the region in which pending home sales actually climbed.

As a national/regional report, the Pending Home Sales Index cannot show local market data and, for that reason, it’s somewhat irrelevant to everyday buyers and sellers in Tacoma. If you’re in the market to buy or sell a home today, it’s your local housing market data that matters to you. 

We watch the Pending Home Sales Index because it paints a broad picture of housing nationwide. To get local market conditions, though, you’ll want to talk with a local real estate professional.

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Both Treasury Bonds and Mortgage backed securities carry interest rate risk, which means that the value of existing bonds will tend to fall as current interest rates rise. As a result, any rise in interest rates will immediately impact the value of this enormous portfolio. The Fed has to be very careful that dips in value of these holdings

Fed’s Ability to Raise Rates is an Illusion

via Global Investor Newsletter: March 2011 | Euro Pacific Capital.

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Mortgage markets improved last week in a week of few economic releases. The one major data point — Retail Sales — showed stronger-than-expected, but markets reacted mildly. The report’s strength was whispered in advance of the actual release; its reading validated Wall Street’s growing faith in the U.S. economy.

Most action last week revolved around the Middle East:

• Libya’s internal turmoil continued
• Bahrain clashes intensified
• Saudi Arabia’s citizens planned a Day of Rage

In response to these events, Wall Street continued its flight-to-quality. Mortgage-backed bonds are now at their best levels since early-February. Mortgage rates have improved 4 straight weeks.

Unfortunately for rate shoppers in Washington , the gains have been meager. Conforming mortgage rates have only dropped slightly.

This week, however, the market could move in either direction.

The biggest news on tap is the Federal Open Market Committee‘s 1-day meeting, scheduled for Tuesday. The Fed is expected to leave the Fed Funds Rate near 0.000 percent, but that doesn’t mean that mortgage rates won’t change. The FOMC’s post-meeting press release will be closely scrutinized on Wall Street. Any changes in theme, tone, or message will cause mortgage rates to dart.

This week also marks the return of housing data with Housing Starts, Building Permits, and Homebuilder Confidence due for release. Housing is believed to be key to the economic recovery so strength in these reports should lead mortgage rates higher.

In addition, several inflation-related data sets will be released including Consumer Price Index and Producer Price Index. Inflation is generally bad for mortgage rates and with gas prices rising to a multi-year high, pressure will be on for mortgage rates to rise.

Lastly, there’s Japan.

The nation’s earthquake, tsunami, and (now) looming nuclear threat will have implications on the global bond market. Mortgage rates may benefit while the crisis remains unresolved.

If you’ve floated a mortgage rate over the past few weeks, it may be time to lock that rate down. Economic factors should be pushing rates higher, but geopolitics and natural disasters are keeping them low.

It’s a perfect time to commit to a loan.

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Mortgage markets improved last week as Wall Street’s concerns about the Middle East trumped its fears of inflation. Conforming and FHA mortgage rates in Washington fell to a 3-week low.

Last week marked the second straight week in which mortgage rates fell, a streak that follows four straight weeks of climbing mortgage rates.

It’s been a bout of good fortune for rate shoppers and home buyers.

In addition, according to Freddie Mac‘s weekly mortgage rate survey, the average spread between conforming 30-year fixed rate mortgages and 5-year ARMs has widened further.

The two benchmark products are now separated by 1.15%. It’s the largest interest rate gap in recent history; one that yields a monthly payment difference of $68 per $100,000 borrowed.

This week, it’s unclear in what direction mortgage rates will go.

On one side, there’s ongoing unease related to protests in Libya and its neighbors, and that’s driving safe haven buying.

“Safe haven buying” describes when investors flee risky situations and put their money in the safest places possible. Mortgage bonds are one such place, so when safe haven buying is in effect, bond demand is high so bond yields (i.e. mortgage rates) fall.

On the other side, inflation is ramping up.

Recent economic data shows that the economy is expanding, and the Federal Reserve is maintaining its accommodative growth policies. Therefore, this week, the key economic event will be Friday’s jobs report. if job creation is high, expect inflation fear to re-ignite, and mortgage rates to rise.

Another risk factor for this week’s rate shoppers is that tensions begin to settle in the Middle East, or that Wall Street gets more comfortable with rising oil prices. If that happens, safe haven buying will subside and mortgage rates will resume rising.

There appears to be more reasons for mortgage rates to rise this week than for them to fall. Plan accordingly.

If you have not locked a mortgage rate yet, this week may represent your last chance to get a low one. Talk to your loan officer and make a plan.

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Mortgage markets worsened last week as Wall Street came to terms with the expanding economy; and realized the Federal Reserve may be trying to induce inflation.

Better-than-expected retail sales and positive job growth buoyed stock markets and sank bonds.

Mortgage rates in Washington rose for the 4th time in 5 weeks last week, extending a losing streak which dates back 4 months.

Today, fixed, conforming rates are three-quarters of a percent higher as compared to the market’s low point, November 3, 2010. For a $200,000 home loan, that size rate hike equates to an increase in a monthly mortgage payment of $89 per month.

Mortgage rates are at their highest levels of the year and, this week, they may continue ticking higher.

There isn’t much data set for release this week so markets will take their cues from two major events — one economic and one political.

The major economic event is Fed Chairman Ben Bernanke‘s testimony to the House Budget Committee late-Wednesday. Chairman Bernanke is expected to speak about employment, but will likely touch on other topics of import including economic growth, the U.S. dollar, and the nation’s debt ceiling.

The Fed Chairman’s comments will move mortgage rates in one direction or the other, so locking in advance of his testimony may be prudent. Mortgage rates have more room to rise than to fall, after all.

The second major event is Egypt‘s ongoing political strife. By Thursday of last week, Wall Street had shrugged off the region’s crisis and unwound the safe-haven trades that had helped mortgage rates during the week prior.

If instability returns, mortgage rates, once again, will be pressured lower.

Regardless of your rate-locking plan for this week, it’s important to recognize that, although rates have risen, they’re still well below historical average. Therefore, rates may have a lot of room to move higher, still.

If you’re shopping for a mortgage, or are now under contract, consider locking your rate as soon as possible.

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Mortgage markets improved this week as positive economic data was overshadowed by geopolitical strife. A flight-to-quality drove buy-side activity in mortgage bond markets, which, in turn, helped conforming rates fall across the state of Washington.

Last week marks the first time this year that mortgage rates fell on a week-over-week basis, and considering why rates fell, it points to the fragile nature of the global economy.

By all accounts, last week showed that the U.S. economy is in recovery.

1. Housing data rises to its best levels in 8 months (LA Times)
2. Consumer sentiment hit a 7-month high (NPR)
3. Business investment increased 1.4% in December

Furthermore, the Federal Open Market Committee met last week and said that the economy continues to expand (although the pace is slower-than-optimal).

Normally, positive news like this would drive mortgage rates higher, and during the early part of the week, it did. But then, as political problems in Egypt grew larger, international investors began to shift money from their risky assets into the relative safety of the U.S. bond market.

This includes mortgage-backed bonds, of course. The buyer influx pushed up prices and, because bond yields move opposite price, mortgage rates dropped.

The week ended with rates at their lowest levels of the week.

Next week, though, rates could reverse. There’s two developing stories rate shoppers should watch.

The first is related to Egypt. In addition to buying mortgage-backed bonds, investors are gambling that oil prices will rise, too. Egypt is the world’s 21st largest oil producer and a disruption of its supply could send gas prices soaring. This circumstance would be inflationary and inflation is the enemy of mortgage bonds.

Crude oil jumped 4.3% Friday afternoon. If that continues, mortgage rates should start rising.

The second is tied to jobs. Last month’s jobs data was weaker-than-expected on Wall Street and it sparked a mini-rally in mortgage rates to start the year. Jobs are paramount to economic recovery so if this month’s figures are lower than the consensus figure of 150,000, expect mortgage rates in Tacoma to fall.  If the number is stronger than 150,000, expect mortgage rates to rise.

The jobs report is released Friday at 8:30 AM ET.

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Mortgage markets worsened last week in a holiday-shortened trading week.

As the body of U.S. economic data continues to show slow, steady improvement, Wall Street is becoming a net-seller of mortgage-backed bonds. As a result, conforming mortgages rates in Washington are rising.

This is why conforming and FHA mortgage rates rose last week in Washington. Existing home supplies plunged to a 2-year low in December, and unemployment claims dropped more than expected, giving hope for the U.S. economy in 2011.

This week, that trend may continue. There’s a lot of news set for release.

The biggest story of the week is Federal Open Market Committee‘s 2-day meeting. Scheduled for Tuesday and Wednesday, the FOMC’s meeting is the first of its 8 scheduled meetings this year.

In it, the FOMC is expected to vote the Fed Funds Rate unchanged in its target range near 0.000 percent, but it won’t be what the Fed does that’s so important to mortgage markets — it will be what the Fed says. Wall Street will be watching the FOMC’s post-meeting press release for clues about the economy, and the central banker’s next steps. From what it reads, Wall Street will react.

This week is also heavy on housing data.

Following up on last week’s Existing Home Sales and Housing Starts figures, this week features 4 additional releases:

1. Case-Shiller Index (Tuesday)
2. Home Price Index (Tuesday)
3. New Home Sales (Wednesday)
4. Pending Home Sales (Thursday)

Strength in housing should lead mortgage rates higher as it becomes more clear that the sector is on solid ground.

Since November 3, mortgage rates have been trending higher in Seattle and Gig Harbor and across the country. The Refi Boom is over, but low rates remain — for now. If you’ve yet to lock a mortgage rate, consider doing it soon.

Before long, rates won’t be so low.

Related articles

• Summary Box: Key mortgage rate rises to 4.74 pct. (seattletimes.nwsource.com)
• Home-Mortgage Rates Steady (online.wsj.com)

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Mortgage markets worsened last week on a turn-around in sentiment across the Eurozone. The sort of “safe haven” buying that had buoyed mortgage bonds since the New Year dissipated, and mortgage rates resumed climbing.

Last week marked the first week since the end of 2010 that mortgage rates have risen, breaking a 2-and-a-half-week rally.

Conforming and FHA mortgages in Washington increased in rate by roughly 1/8 percent.

Last week was data-sparse so mortgage markets took their cues from Europe — specifically Portugal and Spain. There have been lingering concerns that the two countries might default on their respective national debts. The development has a similar feel to what transpired in Greece in April of last year, and that may be why markets are reacting in much the same manner.

At the beginning the year, the fear of default in Portugal and Spain was elevated. It drove money managers away from risky assets and toward safer ones, including U.S. mortgage bonds. Last week, however, those fears eased. Money reversed flow and, as a result, mortgage rates rose.

Truly, this is a global market.

This week, the Eurozone story continues, but there is a lot of U.S. housing data due for release, too.

• Tuesday : National Association of Homebuilders Housing Market Index
• Wednesday : Building Permits, Housing Starts
• Thursday : Existing Home Sales

Housing is considered key to the country’s economic recovery, so strength in this week’s housing should lead stock markets higher on better expectation for the economy which would, in turn, cause a sell-off in mortgage bonds, driving mortgage rates higher.

Mortgage rates are decidedly higher than their lows of 2010, but have much more room to rise. If you haven’t locked your mortgage rate yet, consider taking care of it this week.

Rates have farther to rise than to fall in the medium-term.

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Mortgage markets gained last week as a combination of safe-haven buying and an improving economic outlook attracted new buyers. Demand for mortgage-backed bonds outweighed supply and conforming and FHA mortgage rates edged lower.

Last week marked the second straight week that mortgage rates fell in and around Washington. Rates had risen over the previous 7 weeks.

According to Freddie Mac‘s weekly mortgage rate survey, the national average rate for a 30-year fixed rate mortgage is 4.77 percent with an accompanying 0.8 points required.

This week, with no new data due for release, look for last week’s two biggest stories — jobs and debt — to carry forward. The first such story relates to jobs.

Friday, the Bureau of Labor Statistics released its monthly Non-Farm Payrolls report. Consensus estimates were for 150,000 net new jobs created December, with “whisper numbers” pegging the number as high as 250,000. Mortgage rates increased on the chance that the rumors were right.

It turned out, they were not.

Accounting for revisions to past months’ data, December’s jobs data was in-line with expectations, resulting in a mortgage rate retreat that lasted all day Friday. That momentum should carry forward into the early part of this week.

The second story is tied to safe-haven buying.

The U.S. mortgage market benefited from growing concerns within the Eurozone that Portugal could default on its debt. The story emerged three weeks ago when Portugal’s debt was downgraded. It picked up steam last week after a weak debt offering. It’s a similar beginning to what transpired in Greece last spring.

Mindful of their respective risk, worldwide investors chose to shift risk toward safer asset classes which includes, of couse, mortgage-backed bonds. This week, those risks will remain and the flight to quality assets should continue. Mortgage rates will benefit.

Given the likelihood that mortgage rates will fall this week, it may be tempting to let your mortgage rate float. That strategy could prove foolish.

Mortgage rates fell to historic lows in 2010 and sprung higher at the first possible opportunity. Rates remain at ultra-low levels and have lots of room to rise. This week, consider buying on the dip. It may be the last chance you get.

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