Atlanta Real Estate Blog

Mortgage bond prices fell last week pushing mortgage interest rates higher.  The Treasury auctions were mixed with the 3 and 10-year auctions showing decent foreign demand.  Unfortunately the 30-year auction was a huge disappointment and caused mortgage interest rates to worsen Thursday.  The fear of future rate hikes sent mortgage bonds lower Friday pushing mortgage interest rates higher.  For the week, interest rates rose by about 1/2 of a discount point. (That means your monthly payment would rise by about $0.33  per $1,000 borrowed.  For a $100,000 loan, your payment would increase by $33.00 per month).

The consumer price index will be the most important release this week.  Any signs of inflation will generally not bode well for mortgage bonds. Retail sales and the Fed minutes are also likely to factor into trading this week.  Any surprises may lead to mortgage interest rate volatility.

Tax Credit

The housing sector made eager pleas to Congress last week to extend the $8,000 first time homebuyer tax credit.   The benefit was part of the stimulus plan and expires the end of November. The White House indicated the program "helped the economy" and led to "quite a bit of success" and noted consideration of extending the program.  There are additional proposals in the Senate to not only extend the program but also to increase the tax credit and remove the first time homebuyer qualification (The Senate passed a similar resolution last year, but the House of Representatives did not).  Unfortunately the cost to extend the credit is around $1 billion per month ($14.8 billion in unbudgeted expense for the fiscal year).  This has politicians from both sides of the aisle concerned (How are they going to pay for it?").  The House voted Thursdayto extend the credit for American service members another 12 months.  Both parties have members pushing for the extension to apply to all purchasers (not just people who have not owned a home in the past three years;  Will it be retroactive?). Analysts indicate some sort of extension is very likely.

Last week was a great example of the danger of thinking rates would always improve.  The good news is that despite last week's bounce higher, rates still remain historically favorable.

Tags: Mortgage interest rates rise, future rate increases, Congress, Homebuyer Tax Credit extension, 30-year auction disappoints, consumer price index, inflation, decent foreign demand, homebuyers, homesellers, White House,  ATLShortSales.com