Mortgage rates fall to 6.74% on oil, then PCE comes in hot

The official national 30-year fixed closed Tuesday at 6.74%, down 0.04 from Monday's 6.78%. That is the lowest daily print in nearly a week. Wednesday's index is not out until about 4 p.m. ET. Early Wednesday, yields are higher after a hot inflation print, so some of Tuesday's help may fade if that holds.

Did mortgage rates go down on Tuesday?

Yes. Mortgage News Daily's daily index as of August 25:

• 30-year fixed: 6.74% (−0.04)
• 15-year fixed: 6.31% (−0.01)
• 30-year jumbo: 6.88% (unchanged)
• 7/6 ARM: 6.30% (−0.08)
• 30-year FHA: 6.32% (−0.02)
• 30-year VA: 6.34% (−0.02)

Freddie Mac's weekly 30-year is still 6.65%.

The move followed oil, not housing data. Morning reports pointed to progress in a peace process, oil dropped, and Treasury yields followed. The 10-year finished Tuesday at 4.63%, down 7 basis points from Monday's 4.70%, with the note up 17/32 in price.

Individual lender quotes differ from a national index. A locked rate is not a closed loan.

What did Tuesday's housing and confidence reports show?

Case-Shiller said June home prices were firming, not booming. The national index was up 1.52% year over year (1.2% in May). The 20-city index was up 2.1% (1.65% prior). Seasonally adjusted, prices rose only 0.13% for the month.

New home sales fell 10.5% in July to a 607,000 annual pace, below the 620,000 survey. That is the third decline in four months. Sales fell 13% in the South and 43% in the Midwest (lowest since 2012). New-home inventory fell 1.6% to 488,000, a 9.6-month supply.

Conference Board consumer confidence fell 0.8 points in August to 89.4 (July revised to 90.2). Six-month expectations hit the lowest since January. Higher gasoline and living costs are the drag.

The Richmond Fed manufacturing index slipped to 4 from 5, missing a 7 survey. New orders fell to 3. Employment dropped to −2. Prices paid and received grew faster.

Richmond Fed President Tom Barkin called the July rate hold a "close call" and said the committee will take the next full data set before the next meeting.

What did this morning's PCE show?

July headline PCE rose 3.7% year over year, unchanged from June and hotter than the 3.6% forecast. Month over month it rose 0.2% versus 0.1% expected.

Core PCE (ex food and energy) rose 3.3% year over year, unchanged and right on consensus.

Other 8:30 prints: personal income +0.4% (survey 0.2%), spending +0.2% (survey 0.1%), real spending 0.0%. Durable goods +1.1% (survey 0.5%), but excluding transportation +0.4% and core capital goods +0.2% were softer. Q2 GDP was unrevised at 1.5%. Q2 GDP prices were revised up to 6.4%, and Q2 core PCE to 3.6%.

MBA applications fell 1.0% (purchase −0.3%, refinance −2.0%). Refis were 42.0% of applications.

Treasury yields are higher on the inflation print. Current-coupon MBS prices were about 3 basis points worse than Tuesday's close in early trading. Mortgage News Daily's Wednesday trend is "moved down slightly," so the rate impact looks small so far.

Friday's Warsh Jackson Hole speech is still the week's other big event.

What does this mean if you are buying or refinancing?

Tuesday was the best print in nearly a week. This morning is a little weaker. If a payment already works at 6.74%, locking takes that dip off the table before Jackson Hole. Waiting is a bet that Warsh or a fade in this morning's PCE reaction helps the 10-year.

Run a payment estimate, then look at purchase or refinance options. See when refinancing beats waiting.

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