Mortgage Market Update

July 21, 2009 · Posted in News For Homebuyers

Well, we’re off to the races. What’s today looking like in terms of the mortgage market? A couple of potentially market moving things are going on:

Leading Economic Indicators – came in up again for the third month in a row. Another sign that we’re not necessarily turning things around but at least avoiding the rapid decline from earlier. The start of a bottom? Many analysts feel that is true. I’m hoping so but withholding judgement.
CIT – the small business lender who was going to file bankruptcy on Friday announced they worked out a stop gap $3 Billion plan to keep them out of bankruptcy. I was on a conference call with a nationally known economic analyst (who will remain nameless) and he was very blunt about his feelings on CIT. He said the only thing this will do is give them time for an orderly bankruptcy rather than a crash.
Bond yields and mortgage rates – on the same conference call this morning, the prediction was made that 10 year Treasury yields will be in the 4.25% range by the end of the year. The main reason for that is, as we talked before, the law of supply and demand and the amount of Treasury borrowings for the rest of the year. Now as we all know, there isn’t a direct link any more between Treasury rates and mortgage rates but anyone who says they aren’t influencing factors of each other is nuts. So, realistically we’re looking at higher rates by the end of the year, if this fixed income specialist (meaning he trades in bonds) is right.

So where are we at in rates? We’ve started the week exactly the same as what we ended up last week.

Recommendation – lock all loans. While there are some good signs about the overall economy (if you can call “bottoming” a good sign), the impact of a bottoming in the economy along with the growing amount that the government is borrowing isn’t going to be friendly for mortgage rates.