Feds may may make move on Interest rates soon

Interest rates for buying a home on the Palos Verdes Peninsula remained level this week . The following are excerpts from the newsletter on interest rates published by HSH Associates :

“There wasn’t a great probability of the Federal Reserve raising interest rates at its September meeting, but the freshest economic data may have diminished those odds somewhat.

As we enter the final month of the third quarter, it would seem that the economic momentum that showed itself in the first half of the period has tailed off a bit, leaving behind a less-than-clear outlook as to when short-term interest rates will again be raised. Despite the Fed’s hopes, the economy continues to plod along, sometimes a bit more quickly, sometimes a bit more slowly but never seeming to sustain one trend or the other long enough as to require action in one form or another.

That said, the economy does seem strong enough as to not be able to completely remove the prospect for a near-term rate hike, nor weak enough as to completely rule it out, either. Futures markets now put the chance of a hike at about one in five, down from about one in three in recent days.

What does this mean for mortgage rates? Most probably, a continuation of the very flat summer pattern for at least a while longer. Without a quickly moving economy, the Fed may prefer to wait for a longer accumulation of modest news before pulling the trigger.

.

Claims for new unemployment benefits remain in a tranquil pattern. In the week ending August 30, some 263,000 new applications for assistance were filed across the country, a figure that is literally the average seen over the last four weeks. With September now getting under way, we’ll have to see if a change in the pattern for better or worse emerges, or whether we’re entering a period of more trend-like employment gains.

Given all the above, and with more August data still to come before the next meeting, we’re not yet convinced that the Fed will remain on the sidelines this month. It’s a well-established tenet that the Fed prefers not to make a move on the cusp of a presidential election, so if not September, they would need to wait until December. That being the case, how would markets react if August’s modest employment gains prove temporary, and the Fed sits idly by while hiring or inflation measures for September, October and November all come in above expectations? This could see the Fed need to make a more aggressive move in raising rates, and that would go against the expectations for a modest, long-running upward trend for policy tightening. It’s not quite a box the Fed is in, but we may be at a bit of a pinch point of sorts for them.

That’s not going to be much of a concern for next week, at least. With a U.S. Labor Day holiday on Monday, markets will get a bit of a respite, but a brief one. The report from the ISM covering service business activity is due on Tuesday, and if the largest sector of the economy is still doing well or has legged up a bit this could give the Fed some reassurance about the underlying strength of the economy. We’ll also get reviews of regional progress in the form of the Fed’s “Beige Book”, and a few other items. With expectations for middling-to-good reports, our take is that mortgage rates may firm up a couple of basis points by the time the week comes to a close.”

The following are interest rate quotes from American California Financial:

30 Yr Fixed FHA
Rate APR
2.750 3.872 Details

Conforming 30 Yr Fixed up to $417000
Rate APR
3.375 3.491 Details

Conforming Jumbo 30 Yr Fixed $417001 – $625500
Rate APR
3.750 3.857 Details

Jumbo 30 Yr. to $1.5 Mil
Rate APR
3.750 3.842 Details

Jumbo 7/1 ARM $1.5 Mil (higher loan amt available)
Rate APR
3.125 3.454 Details

POSTED BY
For more information about Palos Verdes and South Bay Real Estate and buying and selling a home on the Palos Verdes Peninsula, visit my website at http://www.maureenmegowan.com . I try to make this the best real estate web blog in the South Bay Los Angeles and the Palos Verdes Peninsula. I would love to hear your comments or suggestions.

About mmegowan

I am a realtor with Remax Estate Properties in Palos Verdes Estates. Visit my website at http://www.maureenmegowan.com
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