The week ahead brings a blend of news, including a look at inflation and housing, which continue to be hot topics of late. Particularly on the heels of the Fed stating they remain concerned about inflation, Tuesday’s Core Consumer Price Index will certainly garner a great deal of attention. Housing numbers have been mixed of late, but many experts are grudgingly acknowledging that maybe the housing market is not as bad as they originally predicted. Wednesday brings a look at the new construction sector, with Housing Starts and Building Permits.
The chart shows how Bond prices have been “bouncing” up and down in a tight range, causing home loan rates to move higher and lower by about .125% with each “bounce”. As Bond prices move higher, home loan rates move lower, and vice versa. So the chart indicates that Bonds appear poised for a bounce higher, with home loan rates moving lower. But first, Tuesday’s inflation measuring Consumer Price Index will need to prove inflation is tame before another favorable bounce higher and help home loan rates improve.
Chances favor a mild inflation number in light if the recent economic reports, and also when compared to last years elevated reading. But if the Report reeks badly of continued consumer inflation, Bonds won’t like it, and may proceed to bash right through the floor and cause home loan rates to worsen. The good news on this front is that the 200-day Moving Average is a very strong floor of support, and it would take some very Bond-unfriendly news to force prices below this floor and cause home loan rates to worsen.
– Patrick Dunn, Westwood Mortgage Inc. & MMG Weekly
patrick@westwoodmortgage.com