Locking bias

Locking bias

Mortgage bonds opened the day fairly flat this morning.  Bonds are trading in an upward channel and are now somewhat in the middle.  Bonds trading in the center of a range is an indication that they are not certain which way to go.  In such cases, bonds will be vulnerable to price swings that can hurt pricing temporarily.  It could be that we will see bonds gravitate to the bottom of the channel and then lift off and make another run higher.  At this point, that seems to be the likely scenario.  However, as long as bonds remain in the upward trading channel, we will likely see continued improved pricing over time.  This is a wonderful sign for the purchase housing market as we enter the busy season of home sales.

Durable Goods Orders continue to weaken.  The Headline number came in at -1.4% and when stripping out transportation, Durable Goods were at -0.4%.  As you may recall, last month’s number was originally reported higher, which was a bounce back after several negative reports.  However, that number was revised sharply lower in today’s report.  We are still not seeing the savings from lower prices at the gas pump translating to purchases of Durable Goods in US households.  The trust is, the average savings is only about $12 per week for the typical driver.  This is hardly enough to translate into the ability to purchase more expensive goods for the household.  Although many economists predicted this would be the case; that certainly isn’t how things are playing out.

With bonds trading in the middle of a wide range, floating today on short term closings will be risky.  Mortgage pricing is looking great today, making it a wonderful day to lock.  If you choose to float, be prepared to lose some pricing in the near term.  That appears to be the path of least resistance and the one bonds will likely follow today.