Mortgage Market Update by RJ Baxter First Mortgage Corp

Mortgage Market Update by RJ Baxter First Mortgage Corp

Last week was an interesting week as we saw rates improve significantly.  Why?

There were several factors at hand that affected mortgage rates for the better.  The big one was the announcement that unemployment is uglier than we thought. Yes, the overall unemployment rate went down to 9.7%, but keep in mind that this could just be statistical noise.  The big numbers were the weekly claims in at 480,000, and the 2009 numbers which were revised to reflect 1,000,000 more jobs lost than previously reported.  This is the big whammy that sent investors to safe-havens like bonds.  When bonds are being purchased, mortgage rates improve.

The other important announcement was global economic concerns and specifically the concern about European currency failing confidence tests and hence falling in value.  Although this is good for the value of the dollar, it raises more concern about the worldwide economy.  This news was also good for mortgage rates as foreign investors sopped up US bonds in an effort to gain safe and stable investments.

There was an important technical level broken last week as well, which bodes well for continued good rates for the near future.  The 100 day moving average was broken and trading emerged above this important resistance line on Thursday and Friday.  What this means is that the 100 day moving avergage went from a resistance point, a lid on pricing, to a support line, enabling bonds to continue to trade above this line.  Higher bond yields = lower mortgage rates and green bars on the chart indicate rates improving for the better(lower).  The arrow indicates an open above the 100 day moving average on Thursday despite closing below this point, which is a very important indicator.

Another interesting announcement was the US budget which calls for $3.8 Trillion in spending with a $1.3 Trillion deficit.  Am I the only one wondering what the end result of all of this spending will be? 

This week is a rather quiet week as far as economic news is concerned.  It is likely that rates will stay above the 100 day moving average this week and will stay good at least into next week.  However, long term, I am still skeptical that rates can stay at these historically low levels for much longer.

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