QE3 Coming Next Week?Mortgage pricing worsened Tuesday as investors prepped for this week's European Central Bank meeting. The ECB meets Thursday, adjourning at 7:00 AM ET. In other words, by the time the U.S. mortgage market opens tomorrow morning, rates will already be changed.
Wall Street is also jockeying ahead of the Federal Open Market Committee's 2-day meeting scheduled for September 12-13, 2012. There are growing expectations for the Federal Reserve to introduce a new round of monetary stimulus, likely in the form of quantitative easing. This would be the Fed's third round of quantitative easing since November 2008, which is why the not-yet-launched program is dubbed QE3.
QE3, if launched, is expected lower mortgage rates in the near-term.
Home Prices Rise 3.8%; Construction Spending FallsOther news affecting mortgage rates Tuesday included a weak ISM report and a drop in construction spending.
The Institute for Supply Management indicated that its manufacturing index dropped to 49.6. Readings under 50 indicate that more firms are contracting than growing, a sign of economic slowdown. Construction spending fell 0.9 percent, in part, because of a pick-up in home sales nationwide. Homeowners do less building when they're buying.
As a testament to the housing market's strength, CoreLogic reported home prices up 3.8% in the 12-month period ending in July.
On a month-to-month basis, home prices rose 1.3 percent and August is forecasted to show a further increase of six-tenths of one percent. This would push the annual home price increase to 4.6 percent -- a steady, consistent figure.