Smart play is to lock

Mortgage bonds maintain their position above the 100 day moving average this morning, as stocks take a breather after making a strong run higher yesterday. 
Bonds were supported by the release of March’s Chicago PMI, which was reported to be 46.3.  This was well below the 50.2 expected, but a little
better than last month’s 45.8.  However, shortly after this release, the markets’ received news that March’s Consumer Confidence was reported
at 101.3.  This far exceeded expectations of 95.5 and was also better than last month’s reading of 98.8.  This report marks another strong
rating on Consumer Confidence.  Given the recent history of strong confidence however, and average GDP growth, consumers don’t appear to be putting
their money where their mouth is. 


The Case Shiller Home Price Index for the month of January showed stronger than expected housing news.  Because it tracks closed transactions for
the month of January, it’s a bit dated, but widely viewed.  The 20-city index was flat.  However, after seasonal adjustments, the index was
up 0.9% for the month.  On a year over year basis the index moved up to 4.6% from 4.5%.  The media is turning this into very negative news,
claiming we are high risk of a housing bubble.  Because incomes have not increased nearly as fast as home values, eventually homes become too
expensive for the typical household.  The reality is that lower mortgage interest rates have made home affordability remain stable.  However,
when mortgage rates move higher, without a corresponding rise in wages, home affordability will drop and we will be at risk of a bubble. 


With mortgage bonds remaining above their 100 day moving average, we are not in any rush to suggest locking.  However, tomorrow we will receive the
first of the two significant readings on the job market.  Given the recent history of strong reports, the safe play will be to lock.  A strong
report is certain to create volatility in the markets, which could push mortgage pricing higher. 

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