Morning Report 5.4% 30 year fixed rate mortgage by the end of 2014?

Vital Statistics:

	Last	Change	Percent
S&P Futures	1763.2	-4.4	-0.25%
Eurostoxx Index	3039.5	-13.3	-0.44%
Oil (WTI)	95.06	-0.1	-0.08%
LIBOR	0.239	0.000	0.00%
US Dollar Index (DXY)	81.12	0.028	0.03%
10 Year Govt Bond Yield	2.77%	0.02%
Current Coupon Ginnie Mae TBA	105.2	-0.8
Current Coupon Fannie Mae TBA	103.9	-0.1
RPX Composite Real Estate Index	200.7	-0.2
BankRate 30 Year Fixed Rate Mortgage	4.39

Markets are lower as bond traders come back from a long weekend. Bonds and MBS continue their post jobs report sell-off.

The Chicago Fed National Activity Index ticked up a bit in September, while the 4 month moving average remained negative. 

The NFIB Small Business Optimism Report fell from 93.9 to 91.6. He points out that small business is still struggling. That is an important point to remember - the S&P 500 is not a representative sample of U.S. business. Most of the big S&P names have exposure to fast-growing overseas markets and benefit from all the liquidity being pumped into the system by the world's central banks. Small business is more affected by weak demand domestically. The government shutdown weighed on sentiment as well. 

With not a lot of economic data, Fed-speak becomes more important. Dallas Fed President Richard Fisher told CNBC that the markets should bear in mind that QE cannot last forever. The balance sheet is $4 trillion and there are limits to what the Federal Reserve can do. Minneapolis Fed President Kocherlakota will talk about monetary strategy at 1:00 pm EST and Atlanta Fed President Dennis Lockhart will discuss the economy at 1:50 EST.

Homebuilder D.R. Horton reported earnings in line with estimates. Average selling prices climbed 15% as a combination of tight supply and low inventory allows the builders to hike prices at will. The stock is up in the pre-market. 

NAR's Chief Economist Lawrence Yun is making predictions about 2014. Exiting Home Sales will be flat at about 5.1 million units, prices will rise by 6% and the the 30 year fixed rate mortgage will end the year at 5.4%. New Home construction will increase to meet demand (at some point the builders will stop seeing price increases and will have to pump up volume to achieve growth). Lending standards will continue to ease and an improving job market will increase activity. If cash sales drop as a percentage of total sales, the purchase business should improve, but probably not enough to offset the end of the refi boom.