Locking bias

After hitting up against the 50 day moving average, mortgage bonds were pushed lower in late trading yesterday.  The stock market was able to regain some of their losses and close just below a critical level of support.  This was a good sign for stocks after taking such a dramatic fall in early morning trading.  If the stock market is able to make a decisive break above this resistance point today, that would add pressure to the bond market and make the chance of mortgage rates improving today unlikely.  However, bonds do currently have two layers of support just below current levels there to protect against immediate losses.  However, a break beneath these would add upward pressure to interest rates.

CoreLogic released their Home Price Index today, showing that homes appreciated by 0.5% in the month of December.  This puts the year over year increase in home prices at a respectable 6.3% from last December.  With a 5.4% increase anticipated from November 2015 to November 2016, now is a great time to own a home.  However, history has shown that 5-6% rates of appreciation aren’t sustainable long term.  Therefore, it is reasonable to assume that we will see these numbers come down at some point in the future.  Long term, owning a home has proven to be a great investment over the alternative of renting.  Good times like now make a significant impact to the collective net worth of those who own homes.

Bonds remain trapped in a tight range, with little improvement likely today.  Therefore, we will maintain our locking bias.