Despite a second straight week of large Fed purchases of mortgage-backed securities (MBS) and weaker than expected economic data, mortgage rates were unable to move any lower, ending nearly unchanged from last Friday. With mortgage rates at historically low levels and with the industry facing capacity constraints, significant further improvement may be difficult to achieve. In addition, while current economic conditions remain weak, some investors now believe that the economy and the stock market have already bottomed, which could lead to higher inflation and higher rates down the road.

While forecasts vary for the second half of the year, there is no disagreement that the job market is currently performing poorly. Friday’s Employment report revealed that the economy lost slightly more jobs than expected in March, and the Unemployment Rate jumped from 8.1% to 8.5%. The labor market is typically a lagging indicator of the strength of the economy, meaning that it may take longer to turn around than other sectors of economic activity.

Following last week’s rise in New and Existing Home Sales, this week’s news from the housing sector was also positive. February Pending Home Sales, a leading indicator for the housing market, rose 2% from January, suggesting that future New and Existing Home Sales reports may show gains as well. Also, according to the National Association of Realtors (NAR), home affordability reached a new record high. With low mortgage rates, affordable homes, and a first-time home buyer tax credit, conditions in the housing market are favorable for an increase in activity.

The Economic Calendar will be light next week. The FOMC minutes from the March 18 Fed meeting will be released on Wednesday. These detailed notes on the discussion at the meeting often reveal additional insight into the Fed’s actions. Import Prices and the Trade Balance will come out on Thursday. Treasury auctions will take place on Wednesday and Thursday.

Posted on Tuesday, April 7th, 2009 at 1:08 pm and is filed under Mortgage Rates. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.