Mortgage Market Snapshot Week of 11/10/2008


It’s official. As of 11:04 EST Tuesday November 4th 2008 Barack Obama is the first black president of the United States of America.  In a unprecendented move, President elect Obama moved quickly appointing a 17 person bi-partisan economic team. Members of the team include such economic titans as  former Regan fed chief Paul Volcker, billionaire investor Warren Buffet and former Clinton treasury secretary Larry Summers.  This centrist economic transition team went a long way to bolster confidence that President elect Obama does indeed have the  judgement and intellect to lead the nation through this rough economy.

The economy had it’s share of bad news last week yet again.

  • Auto makers are bleeding cash
  • Jobless claims at a 25-year high
  • Retail sales appear to be stalling

Normally, this would have caused a movement in mortgage rates. Instead, mortgage markets shrugged it off.

The general consensus among traders last week was that the Democratic White House will make every effort to ignite the economy and, if those efforts fail, it will try again. This bodes well for businesses and for the banking system and is one reason why mortgage rates dropped post-election.

This week, without much new data, markets should move on corporate earnings and momentum.  It’s been a while since corporate earnings meant so much to mortgage rates.

U.S. businesses are the backbone of the economy, spending money on goods and services and employing 144 million Americans.  When business is strong, more workers get hired who then, in turn, spend their money and force the hiring of even more workers.

It’s a self-reinforcing cycle so if retailers post better-than-expected numbers this week, expect stock markets to gain favor worldwide as investors chase returns.  This will money to pull out from bond markets of all kinds  — including mortgage-backed bonds.

Less demand for bonds causes mortgage rates to rise.

Also, look at Friday as a volatile trading day.  Not only will October’s Retail Sales figures be announced, but Fed Chairman Ben Bernanke is sharing the stage with his European Central Bank counterpart, talking about monetary policy.

Word choice is a delicate matter on Wall Street so if Bernanke’s comments are viewed as too anti-inflation, or too pro-inflation, expect for mortgage rates to move by a lot.  If you’re shopping for a mortgage right now, consider locking before Bernanke’s 9:00 AM speech.

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