Hunter Palmer

Mortgage rates eased last week settling at the second lowest level on record according to Bankrate.com. A sense of uncertainty seems to have returned to the markets, which tend to send investors running for the safety of bonds, and that is what played out last week and Monday. On Tuesday, however, a renewed confidence that the financial system is stabilizing and signs that the recession may be easing offset lackluster corporate earnings reports to send stocks higher. This has placed upward pressure on bond yields driving mortgage rates slightly higher with the thirty-year setting in around 4.875%. Fifteen year fixed rates are pushing up towards 4.375% and Jumbo rates remain stubbornly in the high 6% range.

For the remainder of this week I expect mortgage rates to remain off their lows and possibly push towards 5% as the bear market rally on Wall Street regains its legs. Corporate earnings will continue to be the big news for the coming week and can always have an indirect impact on rates but with more and more economists and government officials seeing a slowing of the current economic downturn and an inevitable recovery, inflation fears, while not immediate, will eventually creep back in to market expectations. Though it is unclear when this will occur, one thing is certain. Mortgage rates cannot remain this low forever. The current combination of low rates and low home prices have made this the best time to buy a home since 1970 according to the National Association of Realtors Housing Affordability Index and the addition of the first time homebuyer credit of $8,000 means this should be a busy season as buyers rush to snap up the bargains before rates and home prices begin rising again.

Mortgage rates broke their four week fall last week as rates rose slightly with the benchmark thirty-year ending up right at 5.00% after another strong week for the stock market depressed bond prices. But that has since changed this week with bonds recovering most all of last week’s losses sending mortgage rates back below 5.00%. Bad economic news has won out over some better than expected corporate earnings reports to send stocks lower in the first two days of the trading week. Outside of Wednesday’s report on consumer prices, which could be a market mover, there is little economic data left to be released this week so the focus will return to corporate earnings. The most recent release was after the closing bell on Tuesday when Intel reported it beat Wall Street expectations for both sales and income in the first quarter. Earnings reports like this have the potential to reignite a rally in stocks and could drive mortgage rates higher. In the longer term, I still feel we will remain in a range for the remainder of the second quarter but I do not see rates falling much further. On the contrary, I look for rates to begin slowly rising starting in the second half of 2009 as more tangible signs of an economic recovery become evident.

Mortgage rates have edged up but still remain very attractive with the thirty year fixed still around 5.00%. Another strong week for stocks hurt bond prices driving yields higher and mortgage rates followed. One bright spot this week was a report released by a forecasters at MoodysEconomy.com that predicted home prices would bottom this year and begin rising in 2010. This is a national forecast and, as I have said before, I think we have seen the bottom locally.

We have no major reports or bond auctions in the coming days so I see mortgage rates staying about where they are with only minimal day-to-day fluctuations. After all of the efforts by the Fed and signs that the financial system may be stabilizing, I don’t see rates going much lower either in the short or long terms. In fact, recent signs of optimism in the equity markets may begin to eventually erode bond prices, as we have seen signs of this week, and place upward pressure on mortgage rates. That would actually be a welcome sign as it would indicate the onset of an economic recovery which would ultimately benefit the housing market. As for now, let’s enjoy these historically low mortgage rates while they last.

Mortgage rates remain at historic lows this week with the benchmark thirty-year fixed hovering between 4.625% and 4.875%. After last week’s upbeat reports on the housing market we are reminded this week that were not entirely out of the woods yet. February foreclosure filings rose to 84,000, up from 68,000 in January and a key index of housing prices showed a record drop in home prices for January – down 19% from the year prior. Another report pertinent to our local market was released by the National Association of Realtors showing second-home and investment property sales comprised 30% of all transactions in 2008. This compared to the all time in 2005 when second-home and investment purchases comprised 40% of all transactions. One bright spot this week was a forecast released by an analyst at Moodys.com that predicted home prices would bottom this year and begin rising in 2010.

We have no major reports or bond auctions in the coming days so I see mortgage rates staying about where they are with only minimal day-to-day fluctuations. After all of the efforts by the Fed and signs that the financial system may be stabilizing, I don’t see rates going much lower either in the short or long terms. In fact, recent signs of optimism in the equity markets may begin to eventually erode bond prices and place upward pressure on mortgage rates. That would actually be a welcome sign as it would indicate the onset of an economic recovery which would ultimately benefit the housing market. As for now, let’s enjoy these historically low mortgage rates while they last.

More hopeful signs of a recovery in the housing market could be seen this week as Monday’s report on existing home sales figures showed a surprise jump of 5% for February and new home sales also surprised with a jump of 5%. For Bay County the increase for existing home sales was 29%. Statewide the increase in condo sales was also up 15%. This follows a 21% jump in mortgage applications last week and a surprise increase in housing starts and permits last week. Also, the Mortgage Bankers of America reported Thursday that mortgage rates stood at their lowest levels in fifty two years.

On Monday, the Treasury Department announced its long-awaited plan to purchase toxic debt off of banks’ books, including mortgage backed securities. Wall Street cheered the plan with the biggest one day gain in the Dow since November. The real test will be how well private equity participates with the government in buying the bad debt. Right now we are seeing a delicate balancing act of the Federal government attempting to push mortgage rates lower while issuing new debt to buy bad debt which tends to drive rates higher. So far they are doing a remarkable job. Hopefully, this will all translate into borrowers being more willing to step into the housing market and more banks willing to lend to them.