Mortgage rates yesterday recovered the rate sheet losses lenders passed along to consumers last Friday. The was no specific reason for the modest improvement. Economic data was absent and trading activity was slow. For the most part, lenders were able to share small gains because mortgage-backed security prices rallied late Friday afternoon following a morning sell-off. The majority of lenders did not reprice for the better on Friday, so we were due to get that pricing back yesterday morning.  

To remind readers, as benchmark Treasury yields fall,  prices of mortgage-backed securities move higher, which allows lenders to offer lower mortgage rates. As Treasury yields rise, mortgage-backed security prices are led lower, which forces lenders to push mortgage rates higher.

We had a few economic data releases and a Treasury auction today, but mortgage rates reacted to headline news more than anything. First the data and the auction....

S&P/Case-Shiller released their monthly Home Price Index this morning.  This data tracks the monthly change in the value of residential real estate across the United States.   Many economists believe that until home prices start to stabilize it will be extremely difficult for our economy to sustain growth.  This makes tracking home sales data much more important than usual.  

Today’s release indicated home prices continued to pull back in February. On a non-seasonally adjusted basis, in February, the 20-city home price index fell 0.9 percent to 144.03 while the 10-city home price index declined 0.6 percent to 156.8. On a bright note, on a year over year basis, the 10 city index is now up 1.4 percent from last February and the 20 city index is up 0.6 percent. This is the first time since December 2006 that both annual rates of change for the two composites have been positive. Unfortunately, on a month to month basis, only 1 of 20  cities, San Diego, showed improvement, all others experienced further home price declines from January 2010 with 12 of 20 falling by at least 1.0 percent. While this data seems to indicate housing is still contracting, it reports on home prices in February and buyer demand was not seen improving until March. This implies there is reason to believe home prices may start to stabilize as we head into the summer months. READ MORE

Our final scheduled economic release of the day gave us a measure on how consumers are feeling with the Consumer Confidence report.   This is a survey conducted by the Conference Board, they ask consumers questions about their present economic attitude and expectations of future economic conditions.   Since our economy is driven by consumer spending, market participants track consumer confidence to get  a gauge on how the consumer is feeling.  An optimistic consumer is much more likely to spend money while a pessimistic consumer is more likely to save or pay off debt.

Today’s release indicated consumer attitudes continue to improve. The overall index came in at 57.9, the highest reading since September 2008. The expectations index increased to 77.4 in April, the strongest showing since October 2007, from a revised 70.4 in March. The present situation index advanced to 28.6, the highest since May 2009, from a revised 25.2.  The "jobs hard to get" index fell to 45.0 percent from 46.3 percent, while the "jobs plentiful" index increased to 4.8 percent from 4.0 percent.  Overall this report implies consumers are feeling more confident.

At 1pm, the Treasury announced the results of their $44billion 2 year note auction.  Demand was below average but the market did not react poorly afterward. This is because S&P, the ratings agency, downgraded Greece's government debt to junk status earlier in the day. This was an unexpected event and resulted in stocks selling off and the bond market rallying. Lower benchmark Treasury yields helped mortgage-backed security prices rally enough to allow lenders to reprice for the better. READ MORE ABOUT GREECE

Reports from fellow mortgage professionals indicate lender rate sheets are improved today.  The par 30 year conventional mortgage rate is still in the 4.875% to 5.125% range for well qualified consumers but a few more lenders are now offering 4.75% at par.  To secure a par interest rate on a conventional mortgage you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee.  If you have lower FICO scores or higher loan to value, you should consider a government FHA loan which offers similar rates as conventional, but with higher costs.

Today was the first day of the Federal Open Market Committee’s two day meeting. These meetings occur eight times a year and are considered one of the most influential events for global financial markets.  The findings of their meeting will be communicated tomorrow  at 2:15pm. Mortgage rates will be listening for any changes in tone or economic guidance. If the Fed is feeling more optimistic, it could push mortgage rates higher.

After lenders repriced for the better, I favor locking.