Mortgage Market Update

Unfortunately with everything the new administration did last week very little if any of it was aimed at bringing mortgage rates down. The stock market was not impressed with what has been put forth so far. We are in a waiting game to see if the markets either fall far enough and there is enough fear to bring rates down or if the Federal Govt gets back on track with the aggressive stance they took towards rates back in December. Lower mortgage rates are still a key component of turning not only the housing market but the economy at large. I am no sure if the current administration sees it this way. If things deteriorate enough they will have no choice but to get on board.

Even with almost 800 billion being spent through the stimulus bill, which would normally be inflationary we saw rates heading down on Tuesday when the bill was signed because of the announcement that the housing bill would be rolled out the next day. The details of the housing bill were a huge disappointment for everyone in the housing industry. It does very little to keep home values from falling or stimulate home purchases. Seems to me to be a whole lot smarter to support that end of the market so that those in trouble can sell their homes instead of having to be "bailed out'. If home values were not falling and there were more buyers we would not have a foreclosure crisis. Remember from my early20e-mails of a year ago - Two things make a foreclosures 1. economic hardship on the borrower (loss of income) 2. inability to sell the house for more then what is owed on it.

When they talk about toxic assets they forget what makes them toxic is a moving target. As more people loss their jobs and home values continue to fall, more and more of the assets become "toxic. They want to value these assets. The value is not a set number. It moves as the value of the homes and the ability of the borrowers to repay move. Economics is a dynamic model. Everything effects everything else. You can reach points of equilibrium but that number can be far different then what is originally predicted because of this.

Below will give you a summary of the week. Not sure if the charts will come through Ok. I'll keep watching for new of lower rates.