San Diego Mortgage Rates Update 01/28/2010

San Diego mortgage rates improved modestly yesterday but my wholesale lenders did not issue rate sheets with any improvements due to several factors causing them to hold back.  Mortgage backed securities prices remained in a narrow range and most lenders were waiting for the end of the FOMC meeting today at 2:15pm eastern time. This was a major event that always has the potential to move interest rates in either direction and in fact it did! First let’s look at some other events this morning.

The Mortgage Bankers’ Association released their weekly applications index which covers over 50 percent of all US residential mortgage loan applications taken by mortgage bankers, commercial banks, and thrifts.  This gives economists a look into consumer demand for mortgage loans. More loan applications indicates an increase in home buying interest which is  a plus for the housing industry and economy.  Additionally, when rates are low an increase in applications implies consumers are refinancing for lower housing payments which can result in increased disposable income and this disposable income trickles back into the economy.

The report indicated a 3.3% decline in purchase application activity and a 15.1% decline in refinances from last week and in my opinion is primarily due to the recent tightening of lender guidelines making it harder for borrowers to qualify for a loan.  Keep in mind, San Diego mortgage rates are in the low 5% range and historically near a 50 year low. This tightening of guidelines is ahead of the Fed’s intentions to exit the MBS market in March and in fact will help the FED to exit the MBS market more smoothly.  In simple terms the weakness in the labor market and the refinance surge over the past year along with tighter guidelines has resulted in a smaller pool of qualified borrowers so loan production will be slow enough to allow the FED to exit without causing any major market disruptions.

Also today we had the New Home Sales survey showing sales in November fell by a much larger than expected 11% to an annualized pace of 355,000 sales.   Economists expected December’s report to post an increase in new home sales to an annualized pace of 370,000 sales.

The report indicated New Home Sales in December were much worse than expected. Sales fell 7.6% to an annualized pace of only 342,000.  Helping to offset the negative report was the prior month’s report was revised higher to 370,000. The seasonally adjusted estimate of new houses for sale at the end of December was 231,000. This represents a supply of 8.1 months at the current sales rate. An estimated 374,000 new homes were sold in 2009. This is 22.9% below the 2008 figure of 485,000 and a record low for annual new homes sales yet the median sales price of new houses sold in December 2009 was $221,300, an increase of $11,000. The average sales price was $290,600, an increase of $20,600.

Now onto the FOMC Statement. Drum roll please…………….    San Diego mortgage rates moved higher after the statement!!

There actually was not much difference from the December statement. The Fed  still showed a bias towards a positive economic outlook,  they didn’t show any change towards their stance on exiting the MBS purchase program in March but some district voters were against continuing a low interest rate policy citing beliefs that  the economy no longer needs such a low level of fund rates to support it.  The market didn’t like this and MBS prices quickly fell causing lenders to hike rates. 

My wholesale lenders issued rate sheets worse than yesterday. The 30 year fixed rate mortgage remains in the 5% to 5.25% range for well qualified borrowers. Well qualified assumes a credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs. Check back frequently for news affecting San Diego mortgage rates!