And the background for this is a US and global economy in an anxious transition to recovery from a recession that rivaled (rivals?) the Great Depression.

So, how do we answer the question? Since we’ve experienced over two years of unprecedented low mortgage rates, it’s fairly easy for anyone to predict mortgage rates will go higher. Since the beginning of the new year, there seems to be a slow trend upward in rates giving credibility to this prediction. There are concerns of inflation (more globally then in the US) with a spike in commodity prices.

But inside what very well might be a slow but steady rise of mortgage rates through this year will be dips and retrenchments. No line on a chart I have ever seen is a straight line. In every trend there are opportunities for us to harness for our clients.

There are three places where rate trends and movements emerge in mortgage rate movements. They are:

1. Economic fundamentals, such as monthly and weekly employment figures and US Treasury auctions
2. Technical trends in the prices of Mortgage Backed Securities (MBS) and US Treasuries.
3. Political and global events

As wonkish as all this sounds, this is where our monthly mortgage payments come from – investor reactions to these factors and where those investors feel is the best and safest place for their funds. As it happens, we have all three indicators vying for attention in roughly equal amounts at the moment, which makes calling the shot that much more fun.

First, we have a stock market that just had a predictable move down around 165 point on Friday (Jan. 28th) after many weeks of being over-bought. Will a correction continue?

Second, a trend has appeared on the pricing charts of MBS. It’s a channel showing prices going up – which means lower rates. Can the price break through this line of resistance, or will it bounce off this line and keep rates where they are or higher?

Finally, will the events that began in Tunisia, now sweeping through Egypt and possibly spreading into other Middle East countries push up the price of oil and bottleneck the Suez Canal? Will that cause investors to flee into the Treasury markets pushing down rates?

Did we just answer a question with a question?

– John Ebner and Tracy Andreini, Opes Advisors in San Francisco

Tracy Andreini with Opes Advisors can be reached via email – tandreini AT opesadvisors DOT com – or via phone at (415) 869-6102. We think she’s amazing!