CHARLOTTE METRO REAL ESTATE TRENDS AND STATS

Mortgage bond prices fell last week pushing mortgage interest rates higher. The bond market took a beating as stocks surged despite mixed data. Existing home sales in November rose a surprising 7.4%. However, revised gross domestic product figures showed the economy only grew 2.2%, which was weaker than the expected 2.8% mark. Personal income and outlays data came in weaker than expected helping a bit. Unfortunately, the thin trading conditions magnified the earlier losses and made it difficult to recover. For the week interest rates rose by about 1 3/8 discount points.

The Treasury auctions will take center stage next week. If foreign demand falters we will likely see mortgage interest rates head higher. The bond market will close early Thursday in advance of the New Year's Holiday Friday. The shortened trading week may result in some market volatility coupled with thin trading conditions likely.

Consumer Confidence Index

The Conference Board releases the Consumer Confidence Index on the last Tuesday of every month. The report details the levels of confidence individual households have in the performance of the economy. The data is derived from a survey of 5,000 households nationwide. The survey polls consumer opinions on current business conditions, their jobs, their incomes, and their future spending plans.

The consumer confidence index is significant in that it provides a precursor into consumers' willingness to spend in the months ahead. However, many analysts point out that willingness to spend does not always convert to actual expenditures.

Despite economic uncertainty, liquidity issues, and housing market weakness, American consumers continue to spend. However, many analysts question whether consumers can continue to buoy the economy, especially amid rising unemployment and continued tight credit.

This week's release will be eagerly anticipated. Look for any variation from estimates to cause mortgage interest rate volatility. Signs of eroding consumer confidence could lead to improvements in mortgage interest rates. However, stronger than expected figures could spike rates higher.

With mortgage interest rates relatively low, capitalizing on current levels is recommended to protect against future volatility. Remember, mortgage interest rates tend to trend lower slowly, while increases tend to occur quickly. A cautious approach is necessary to protect from future market volatility.

Mortgage bond prices were near unchanged last week holding mortgage rates steady. Trade was extremely volatile with swings of 1/2% in discount points common. The Treasury auctions were not as well received by foreign accounts as traders were hoping. The US relies on foreign central banks such as China to fund our deficit spending. If China were to decrease or cease purchasing US bonds and notes, rates would rise.

Interest rates finished the week near unchanged.

The inflation data will be the most important releases this week. Inflation erodes the value of fixed income securities causing prices to fall and rates to rise. The Fed meeting will also take center stage. While no rates changes are expected the wording of the release will be very important.

Trading Conditions

As we all know, mortgage interest rates change on a daily and intra-day basis. With so much volatility, it is often difficult to make the right decision regarding floating or locking. What is important to remember is the fact that there is a difference between gambling and taking a calculated risk when making mortgage interest rate decisions. Floating into an economic release such as the employment report is usually a gamble, as was evident with the rate spike the beginning of this month. In addition, floating over a span of more than a few days is also a gamble. Unforeseen events can cause instability in the financial markets that results in mortgage interest rate volatility. On the contrary, floating on a day of positive market movement with no economic data the following day, while such action is still vulnerable to market movements, can be considered a calculated risk. It is possible for interest rates to push lower due to the uncertain future of the economy. Unfortunately the recent focus has been towards rate increases, which generally don't bode well for lower mortgage interest rates. Taking advantage of rates at the current levels guarantees a historically favorable interest rate and protects against uncertainty surrounding future interest rate developments.