Friday, February 26, 2010

Volume in the mortgage market is very light today as another blizzard blankets the Northeastern part of the country. Buyers are currently dominating what little trading action there is - resulting in slightly improved mortgage interest rates.



The Commerce Department revised higher their guesstimate of the pace of economic growth in the last three months of 2009. According to government figures economic activity actually hummed along at a 5.9% pace in the fourth-quarter of 2009 - slightly ahead of the 5.7% rate initially reported. Most of the growth was a result of inventory rebuilding and business investment in machinery and technology. Most analyst view the current pace of economic growth as unsustainable without a marked gain in final demand from the consumer to generate a drawdown of inventories and to create a rate-of-return on the investment businesses have made in new machinery and technology. Since positive and sustainable job growth is not likely to manifest itself until sometime in 2011 - a meaningful uptick in final demand from consumers remains a long way off - and that is a condition that tends to be supportive for steady to perhaps fractionally lower mortgage interest rates.



The National Association of Realtors reported earlier today that sales of existing homes fell by an unexpected 7.0% from month earlier levels. The extension and expansion of the government's homebuyer tax credit programs along with still low mortgage interest rates and the prospects of improved weather conditions as spring approaches should help sales pick up in the coming months. If the pace of exiting housing sales continues to decline in March and April -- the implications for the economy will be of greater concern to investors.



Looking ahead to next week every economic report from Monday's release of January personal income and spending figures through Thursday's revised fourth-quarter productivity and unit labor costs data will be overshadowed by the drama of Friday's February nonfarm payroll stats. The consensus forecast calls for a drop of 30,000 jobs from the headline nonfarm payroll figure and an uptick in the national unemployment rate to 9.8% from January's 9.7% mark. If the consensus forecast proves accurate, this data will tend to be supportive of steady to perhaps fractionally lower mortgage interest rates. In the unlikely event the February nonfarm payroll shows a loss of 10,000 or fewer jobs and/or the national jobless rate posts a reading of 9.7% or lower -- look for mortgage investors to push mortgage interest rates higher from current levels.