Mortgage bonds traded wildly Monday as Wall Street places bets ahead of this week's main event -- the FOMC meeting scheduled for Wednesday and Thursday. Mortgage rates were unchanged on the day overall.
Fannie Mae released it August 2012 Housing Survey Monday. It shows U.S. consumer divided about housing. Confidence in the housing market is rising, the report showed, but concerns for the U.S. economy overall are dampening that enthusiasm.
Survey respondents expect home prices to increase by 1.6% over the next year and just 11 percent expect a decline in home prices between now and August 2013 -- the lowest level since the survey started in 2010.
It's also noteworthy that :
This dichotomy may explain why home prices are rising nationwide.
There is a booming class of home buyers in markets as large as Orange County, California; Loudoun County, Virginia; and Houston, Texas, and well as in markets as small as Darien, Connecticut and Athens, Ohio, for example. Yet, few sellers want to sell into a rising market.
Big demand and small supply leads home prices higher.
In addition, 40 percent of those surveyed said they expect mortgage rates to rise in the next year. Rising mortgage rates do more to harm home purchasing power than can rising home prices.
There is little economic news due for release Tuesday so expect momentum to carry markets.
The U.S. Department of Commerce releases its trade balance report, and the Federal Reserve will auction 3-year Treasury notes. The trade balance report is unlikely to impact MBS, but strong demand for treasury notes could boost mortgage bonds, causing mortgage rates to fall.
Also, news from Greece may change rates. Austerity measures proposed by the Greek government as part of the terms for receiving aid are coming under fire for being too weak to be effective. If this story grabs more headlines, U.S. mortgage rates may improve on safe haven buying.
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