The Mortgage Man

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Archive for Economy

Thursday July 10, 2008

Weekly jobless claims fall, market reacts.

The Weekly Initial Jobless Claims report came out today much better than forecast.  With 58,000 fewer claims, the report sank to 346,000, the lowest level since April.  This news, which is good for the economy, would normally be seen as bad news for mortgage bonds.  But, mortgage bonds appear to be remaining relatively flat on the news.

Treasury Secretary Henry Paulson and FED chairman Ben Bernanke testified before the House Financial Services Committee today to suggest ways that Congress could “fix” the financial regulatory system to prevent future crises.  I managed to make it through about 30 minutes of the meeting before the barage of stupid questions followed by equally predictable answers gave me a head ache.  At least they do agree on one thing…we need more government intervention.  AWESOME!!  Nothing says efficiency and dependability like putting it in the hands of the government.

Back to the matter at hand; if you are currently working on a mortgage loan, I would suggest locking your rate now.  Bond prices are currently testing the topside support level of the 200 day moving average.  Given the difficulty of crossing that major threashold, combined with the fact that no other significant economic data is due out this week, mortgage bonds are probably about as good as they are going to get in the near term.

Monday June 30, 2008

European inflation could create problems for us here at home with Mortgages and Real Estate.

It is the last day of June and the first day of the week with news from our friends across the pond creating problems here at home.  Inflation in Europe reported for June is around 4% which is much worse than the expected forecast between 1% and 2%.  As we struggle with our own problems here with the neverending run up on oil prices and a lagging economy, investors are likely to move more money into the Euro and away from the Dollar.

What does this mean for you?  Well, first of all, the price of oil is tied to the US Dollar.  And as we have discussed in previous posts, as the dollar lags behind in the global currency markets, the weakness in the dollar continues to be a contributing factor in the price of oil.  In addition, inflationary pressures keep the FED on the hot seat about raising rates to strengthen the dollar.  While this action would be a short term problem in the real estate and mortgage industry, it would likely be a long term stimulus by strengthening the dollar, lowering the price of oil, and thereby relieving the pressure on consumers and discretionary spending.

The affect this is having on mortgage bond trading today is surprisingly positive.  Not a rally by any means, but not negative either.  My crystal ball is in the shop, so I can’t give you an intelligent answer as to why bonds are moving into positive territory based on this news.  What I can tell you is that if you are working on a mortgage loan currently, you might want to float the rate to wait and see if this market moves above current levels of resistance.

In summary, the economy is very complicated and many factors are contributing to the current uncertainty.  If you are on the fence about buying real estate until it “hits the bottom”, be aware you may lose more than you gain by waiting. Ultimately, if we are to move forward, we will need to experience a little short term pain to feel any long term gain.  You can’t make an omelette without breaking a few eggs.