With last week’s beginning of the 3rd Quarter of 2009, investors showed some nervousness with the stock market.  This, along with some weak economic data, helped drive money into bonds and pushed Treasury Yields and also Mortgage Rates a little lower last week.  The 30-year Fixed Rate Mortgage opened this morning at 4.750% paying a 1% Origination Fee for clients with the best credit scores and minimum down payments.  FHA rates dipped below 5% for the first time in awhile with USDA financing hovering near the 5% level for its 100% NO PMI financing.   Rates have stayed above 5% for many weeks so this dip back into the 4′s comes at a great time for those seeking a mortgage.  And oh yeah….there is that Tax Credit thing expiring soon!

Those hoping to see some kind of continual improvement in the economy were disappointed last week.  Economic improvement continues to be relatively uneven. The final estimate for Gross Domestic Product (GDP) for the second quarter was reduced to a decline of 0.74% for the period.  The economy still showed a contraction but it was considerably less than the minus-6.43% seen in the first quarter of the year. Most analysts expect a positive growth number for GDP in the 3rd Quarter spurred by inventory replenishment and “Cash for Clunker” sales.

Consumer moods appear to still be a bit sour. The Conference Board’s survey of Consumer Confidence fell in September to 53.1 where forecasts had hoped to see it rise to 57.0 or thereabouts. While considerably above historic lows of earlier this year, confidence has largely been treading water at best. It’s hard for consumers to muster up much enthusiasm when there are still so many economic problems confronting people each day.

Chief among those problems are poor prospects for employment. Weekly unemployment claims ticked back upwards again during the week of September 26, climbing by 17,000 to land at 551,000 for the week.  Analysts have been expecting an improving picture for job losses going forward.  On Friday, the most important piece of economic data, the Jobs Report, disappointed analysts showing that job losses during the month accelerated from a revised 201,000 in August to 263,000 in September, and the nation’s unemployment rate moved one tick higher to 9.8%. The report also noted that over a half-million job-seekers gave up even looking for work during the month, and there was nothing to suggest that measurable improvement should be expected soon. Productivity figures have been on the rise — meaning that firms are meeting their output needs without having to hire more people — and that trend seems likely to persist for a while yet.

So, even though things appear to be improving in many areas of the economy, the recovery is uneven and many risks and weakness still exist.  For Mortgage Rates, this means we can probably count on an extended period of low rates until one of two things happens.  Once the Fed ends its direct involvement into the Bond Market ending its open market purchase of securities AND/OR the economy begins to show strong signs of improvement we will see interest rates begin to rise.  It could be sharp or it could be gradual but you can pretty much count on the fact that they will be higher.  How much higher is anyone’s guess.

Now is the time for buyers to be taking advantage of these low rates because they won’t be there forever!

Hugh W. Page, M.B.A.
Senior Mortgage Consultant
(919) 874-7557 Direct
(919) 595-9707 FAX
hpage@fmlending.com
www.fallsofficeloans.com