Tuesday, April 21, 2009

Trading activity in the mortgage market is once again light and sporadic. The Fed's presence in the market continues to insure mortgage interest rates are unlikely to make a sustained move to higher levels just yet. Mr. Bernanke and his fellow central bankers have only spent roughly $350 billion of the $1.25 trillion they have in their back pocket earmarked specifically to support the mortgage market. Once the remaining balance in the Fed's direct purchase account of mortgage-backed securities drops below $600 billion -- mortgage interest rates are likely to begin moving higher at an accelerating pace. But for the time being note rates for 30-year fixed-rate mortgages continue to hover within a whisper of record lows.

With the prospect of some nasty inflation developing a year or two out, courtesy of current Federal Reserve and government policies, owing residential real estate has become a lot more attractive than it was just six months ago. While it is true housing won't exactly set-the-world-on-fire in an inflationary environment -- it will likely beat the heck out of many investment alternatives. If my assessment proves accurate, look for the demand for purchase money mortgages to begin ramping up notably as an increasing number of savvy buyers recognize the all-time best opportunity to acquire a home is probably now upon us.