Mortgage Market Weekly Review

In a week in which mortgage markets struggled to find direction, mortgage rates edged higher overall.  The weekly increase was the first since mid-November and it may signal higher rates as we head into 2009.

The week's most talked-about story hit the wires Friday. 

According to the government, the U.S. economy shed 533,000 jobs last month and the national Unemployment Rate rose to 6.7%.  This was the largest number of jobs lost in any one month since the recession of 1974.

In a normal market, job losses of this magnitude would have caused stock markets and mortgage rates to fall.  But stocks and rates didn't fall Friday.  To the contrary, both rose.  This is because -- while the jobs reports was the most talked-about story last week -- it wasn't the most important one.  That story had already been told.

Last Monday -- officially -- we learned that U.S. economy is in recession.

Although most of Wall Street knew it already, the official determination was an acknowledgement that "bad economic data" is not only acceptable, but normal given the current conditions. 

In other words, when the jobs data was released Friday morning, one reason why mortgage rates rose was because markets somewhat shrugged off the data, saying: "Yeah, of course job losses are up -- we're in a recession, after all."

This is an unfortunate development for rate shoppers because bad data usually anchors mortgage rates lower.  Going forward, that won't likely be the case -- at least until the recession is declared to be over.

This week, without much new data being released, markets should trade largely on news of federal intervention and expectations for the U.S. economy.  As retail sales figures drip in from the weekend, be wary of stronger-than-expected numbers as that could pull mortgage rates higher.  The same goes for Friday's official Retail Sales data for November.

Either way, expect volatility throughout the week -- same as we've seen all year long.