San Diego Mortgage Rates Update 03/16/2010

The Federal Open Market  Committee  (FOMC) released it’s statement today leaving San Diego Mortgage rates unchanged. There was no significant change in the verbiage regarding the end of the MBS Purchase Program.  Excerpts from the statement are as follows:

“To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve has been purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt; those purchases are nearing completion, and the remaining transactions will be executed by the end of this month“

But the door remains open for a program extension should our housing recovery falter due to the FOMC’s withdrawal:

“The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.”  Market watchers read this as a sign that the Fed is worried about how their exit will affect mortgage rates.

There were a few other  sentiment shifting statements made too:

1. The statement read ” the labor market is stabilizing” which is an upgrade to labor market conditions.
2. The FOMC upgraded their stance on business spending. What read “Business spending on equipment and software appears to be picking up” last month…now reads “Business spending on equipment and software “has risen significantly”.
3. We did get new verbiage on housing: “HOUSING STARTS HAVE BEEN FLAT AT DEPRESSED LEVELS“. That is a sign that a weak housing market is on the radar of the FOMC. This is a clear cut downgrade to housing.

There was no change in the verbiage referencing the timing of a Fed Funds rate hike, the committee still believes exceptionally low levels of the Fed Funds rate are warranted for an ”EXTENDED PERIOD“.

Plain and Simple: The Fed’s feelings on the labor market have improved since the last meeting while housing remains uncomfortably depressed. The MBS purchase program is scheduled to run out of funding at the end of March, as planned….BUT THE DOOR IS STILL OPEN FOR AN EXTENSION.