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Mortgage Rates Unchanged for Third Consecutive Week

Uncertainty in the global markets, continuing declines in the dollar and a couple of spikes in oil prices spurred safe-haven buying in U.S. Treasury securities. This pushed Treasury prices up and forced their yields, which move in the opposite direction of prices, to edge down from slightly elevated levels. Yields were able to remain low in spite of the release of a batch of mostly upbeat economic reports. Because Treasury yields have been trading within a fairly narrow range, mortgage lenders who base their rates on Treasuries were able to hold them relatively steady for the third consecutive week. New and existing home sales in October were stronger than expected, with new home sales up 0.2 percent to an annual rate of 1.23 million units. Although existing home sales fell 0.1 percent, they came in at a still-healthy annual rate of 6.75 million units-just shy of the 6.76 million posted in September. First-time unemployment claims were down 12,000 to 323,000, and the four-week average, which smoothes volatility, slid to 332,200. Continued claims, those collecting unemployment benefits for more than one week, hit 2.73 million-the lowest level since May 2001. The one piece of negative news was unexpected-a 0.4 percent drop in durable goods orders in October. A decline in orders for computers, autos and aircraft were responsible. When the non-defense category was excluded, orders fell by a steep 1.5 percent. The good news-September durable goods orders were revised upward to reflect a 0.9 percent gain.

Although mortgage rates remained low for the week ended November19, mortgage applications were down, according to the Mortgage Bankers Association. Purchases fell 3.5 percent, while applications to refinance plunged 8.3 percent after rising 10.6 percent the previous week. The 30-year fixed-rate mortgage (based on zero discount points) remains at 5.5 percent, while the 15-year fixed-rate mortgage is just under 5 percent. The introductory rate on the volatile one-year adjustable-rate edged up to 3.5 percent.

November ends and December begins with a bang. Most of the economic reports focus on manufacturing, employment and the consumer--three key factors in the nation's economic recovery. There are two surveys on manufacturing conditions as well as factory orders and new construction. The revised third quarter GDP will also be released. But the lion's share of attention will be on the consumer. Not only are the November consumer confidence report and personal income/spending reports due, but also the all-important employment numbers for November. Treasury yields will respond and mortgage rates will follow. If the indicators come in near expectations, it is likely that lenders will be able to hold rates near present levels.