Mortgage News
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Last Week in Review
EASY COME, EASY GO...Last week, Stocks surged to cross the 14,000 mark on the Dow for the first time ever. But just as the party hats came out, so did a disappointing earnings report from Wall Street darling Google. Suddenly, the Stock that could do no wrong was showing chinks in the armor, and led to fears that other Stocks might follow suit, which caused an across the board sell-off. But every cloud has a silver lining - the money coming out of Stocks was parked over into Bonds. This helped home loan rates improve from levels hit earlier in the week, and end up about .125% better for the week overall.
And as if that weren't exciting enough, Fed Chairman Ben Bernanke took center stage last week, speaking to Congress about inflation, housing, and the economic outlook. He stated that although the recent inflation numbers have been moderating, the Fed remains very concerned about inflation. He underscored that they are staying very alert to economic changes and indicators, but based on their continuing concerns over inflation, it certainly appears that there will not be a cut to the Fed Funds Rate in the near future.
Very interesting note about the press: one line of Bernanke's prepared speech that the media focused on and headlined was "the ongoing housing correction might prove larger than anticipated". While this was indeed pulled directly from the text, the full text reads very differently, as Bernanke is saying that while one risk to the outlook is that the housing correction might prove larger than anticipated and impact consumer spending, he goes on to say that consumers have been spending at a very healthy pace of late. Be very cautious about believing the scare tactics that the press uses, as they often take words out of context.
AND THE MEDIA AREN'T THE ONLY ONES WHO TAKE THINGS OUT OF CONTEXT - REPRESENTATIONS MADE BY SOME CHARITABLE ORGANIZATIONS COULD REROUTE YOUR WELL-INTENDED DONATIONS. TO ENSURE YOUR GIFT DOESN'T WIND UP GOING TOWARDS SOME ADMINISTRATORS NEW BMW...READ THIS WEEK'S MORTGAGE MARKET VIEW.
Forecast for the Week
So what's coming around the bend for Bonds and home loan rates this week? The economic calendar will be slimmer than last week's, but will include a look at the housing market with Existing and New Home Sales being reported on Wednesday and Thursday. Stocks may also continue to drive the action in Bonds, as investors will again be closely watching Stock earnings reports this week, and making decisions on where their dollars are best invested - in Stocks or in Bonds.
And of great importance is the technical battle being fought at the 25-day Moving Average. The chart below shows how this line has acted as a tough technical ceiling of resistance, preventing Bond prices from moving higher and helping home loan rates improve. But just last Friday, Bonds managed to muscle higher, and close above the tough technical ceiling which has kept a lid on improvement in home loan rates for the past several months. But will the move above the ceiling be convincing...or is this just a head fake, like we experienced a few weeks ago, before Bonds were forced back lower and home loan rates moved higher?
Bottom line: Bonds are trying to make a move and help home loan rates improve, but their success will depend largely on the flow of money between Stocks and Bonds. If Stock earnings come in strong in the coming week, it's likely that money may flow into Stocks and out of Bonds, and home loan rates will worsen. If Stock earnings are weak, investor money may flow back into Bonds, and help home loan rates improve.