Mortgage rates rose dramatically this week not only pushing through the 5% threshold but touching 5.50% at one point. We have settled back to 5.375% as of this afternoon but this is still a full half percent higher than we were this time last Friday. The volatility I spoke of in last week’s update turned into a full-fledged collapse in the bond market this week as a series of government debt auctions were met with only a lukewarm response. The problem is that there is such a flood of US treasuries coming on the market to raise cash for the myriad bailouts and stimulus that investors are losing interest (no pun intended) and looking for higher returns in stocks and other types of bonds. The Feds have done such a good job thus far of buying back debt that they were able to maintain an uneasy equilibrium in supply and demand for US treasury securities. That equilibrium appears to have now tilted towards over-supply.
I could mention more bad news on the housing sector this week like the fact that 12% of all mortgages are now currently in some form of delinquency or foreclosure – 49.8% of which were prime loans - but it’s the weekend and we have plenty to be happy and thankful for. I know I continue to be very busy with out of state condo purchasers and we are seeing more and more first-timers coming into the market. Even at 5.375% mortgage rates remain very attractive and there are plenty of signs that worst of this housing downturn is behind us.
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