Doing the Charleston!

Optimism received a shot in the arm last week, for there was much to like in both the stock and real estate markets. First, the Dow Jones Industrial Average soared a whopping 889 points on Tuesday in anticipation of the Federal Reserve lopping the fed funds rate to 1% (which it did). Investors, sensing a market bottom, began buying stocks in a piranha-like frenzy.

More bargain hunters are appearing in the housing market as well. The week before last, the NAR reported that existing homes sales rose sharply in September to the highest level in 13 months. This week, the Commerce Department reported that new home sales rose 2.7% to an annualized rate of 464,000 units (albeit after dropping by a steep 12.3% in August). The median sale price for a new home fell to $218,400, its lowest level in four years. But that's not necessarily bad; lower prices stimulate demand while constricting supply.

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
Construction Spending (September)	Mon. Nov 3, 10:00 am, et	0.7% (Decrease)	Important. Reduced commercial spending is beginning to take a toll on overall spending.
Factory Orders (September)	Tues. Nov 4, 10:00 am, et	1.8% (Decrease)	Important. The decrease in orders is further proof that the economic slowdown is spilling into the business sector.
Mortgage Applications	Wed. Nov 5, 7:00 am, et	None	Important. Last week's spike in mortgage rates could slow the up-trend in applications.
Productivity and Costs (3 rd Quarter 2008)	Thurs. Nov 6, 8:30 am, et	Productivity: 1.1% (Increase) Costs: No Change	Important. Slowing productivity growth suggests businesses are reducing capital investment.
Employment Situation (October)	Fri. Nov 7, 8:30 am, et	Unemployment: 6.3% Hourly Earnings: 0.2% (Increase)	Very Important. Rising unemployment increases the odds that the economy will dip into recession.
Pending Home Sales (September)	Fri. Nov 7, 10:00 am, et	0.3% (Decrease)	Important. A slight reduction in contracts is expected, but the recent trend remains higher.
Consumer Credit (September)	Fri. Nov 7, 3:00 pm, et	$0.5 Billion (Increase)	Important. Tighter credit standards and economic uncertainty are squeezing consumers.

Information above courtesy of Melissa Breeland of Residential Mortgage of SC

So, Tuesday, when the government unexpectedly announced a $500 billion budget for buying mortgage debt from Fannie Mae and Freddie Mac, the demand side of the mortgage market ballooned. 

The surprise demand helped push mortgage rates to their lowest levels since January 22, 2008.  30-year fixed mortgage rates were down by as much as three-quarters of a percent Tuesday before retreating higher.

Not coincidentally, January 22, 2008, was the date of another unexpected government intervention -- a surprise 0.750 percent Fed Funds Rate cut that was meant to spur the economy forward. 

Interventions like these are a big reason why predicting mortgage rates is tough business -- just when you discover the market's balance point, an outside force shifts that balance, creating tremendous amounts of uncertainty about the future.

Uncertainty on Wall Street is typically bad for mortgage rate shoppers because it leads to high levels of volatility.  Look at the trading pattern from Market Open to Market Close yesterday:

• 8:30 AM ET: Markets open with rates falling on the news
• 10:00 AM ET : Rates fall more on momentum trading
• 12:00 PM ET : Rates level at their lowest levels of the day
• 2:00 PM ET : Rates rise as profit-taking begins
• 3:30 PM ET : Rates rise more on momentum trading
• 4:00 PM ET : Markets close with rates down by half

Again, not coincidentally, this is the exact trading pattern from January 22, 2008.  On that day, rates were at their lowest about 3 hours into trading, and then consistently rose all the way into Market Close -- just like we saw Tuesday.

Unfortunately, in the 30 days that followed January 22, mortgage rates rose from a 3-year low to a 3-year high.  And, it's not to say that the same thing will happen from now through December 25, but trading patterns have a tendency to repeat themselves over time.

Mortgage markets seek balance and when there's a dramatic shift, chaos can creates opportunity. Tuesday's $500 billion pledge added new demand and shocked the mortgage market system.  Before long, it recovered to find balance.

As of today, mortgage rates are still hovering near their 3-year lows so if you haven't spoken to your loan officer about a refinance or locking your rate on a purchase loan, consider calling today.

 Infomation above is courtesy of Melissa Breeland of Residential Mortgage of SC

*** Due to market fluctuations, interest rates are subject to change at any time and without notice. Interest rates are also subject to credit and property approval based on secondary market guidelines. The rates shown are based on average rates for the best qualified customers. Your individual rate may vary.  The programs and rates listed here are the most popular, hundreds more are available.

This rate information is courtesy of Melissa Breeland of Residential Mortgage of SC