With Wall Street and all treasury markets closed there are very few things that can affect mortgage rates on the weekend.  This does not mean that there will be absolutely no movement but the movements will be slight and with no conviction.  That will be a great change from this week as there were days in which mortgage rates moved as much as .2% in a single day.

Look for mortgage rates to be volatile for much of October as there are a few factors that will affect mortgage rates.  The fact that the first time home buyers tax credit is getting close to expiration as well as the Federal Reserve Bank concluding their purchases of US Treasuries.  Both of these factors are bad things for the housing market and could help to push mortgage rates higher.

Make sure to check out Subprime Blogger on a daily basis for your mortgage interest rates. We will display the current rates as well as a short commentary similar to the above column. Bookmark the following daily mortgage rates category to gain easier access to our mortgage interest rates column:

Daily Mortgage Rates Column

Author: Jesse Wojdylo

The 10 year treasury rate yield shot up HUGE last week to the tune of 10%!  This is going to force mortgage rates to react this week.  It would not surprise me to see daily mortgage rates work their way all the way up to 5.5% before some consolidation.  For those of you who were waiting for mortgage rates to drop below 5%, well, I think that is now out of the question for quite some time.  The 10 year yield is now above the support level of the 50 day moving average and we are looking at the yield headed towards 4%.

If the yield does hit 4%, it will be likely that mortgage rates will be somewhere around 6%.  As I have been saying for quite some time, this is very bad news for the overall housing market, but it might flush the bottom out as higher mortgage rates are going to bring even lower home prices.

The equation used for the correlation between mortgage rates and the 10 year treasury rate is

y = 2.7283(x)^2 + .5881(x) +.0308.

10 Year Treasury Rate – 3.65%
The correlation shows that the 30 year fixed rate should be approximately 5.52%.  Actual rates…

30 Year Fixed Rate Mortgage – 5.59%

Please check out the daily Subprime Blogger rant; today I let Mr. Bernanke know how I feel:

Oh, so you are planning now for the “restoration of fiscal balance?”  I call bullshit!  The more statements that you make, the more I realize that you are full of shit Mr. Bernanke.  Printing money in an attempt to spend our way out of this recession has not worked in the past so why do you think it will in the future?

Read the entire article here: Ben Bernanke, Please let the Markets Set Interest Rates

Average mortgage rates have been all over the map lately, mostly due to government actions.  Over the last three months the government has bought back trillions in mortgage backed securities as well as auctioning billions in debt through treasury notes.  These two actions have caused mortgage rates to stay artificially low as the government is doing everything in their power to put a ceiling on average rates.  This is very bad news for the long term though.

If and when the economy gets better mortgage rates are eventually go the be set by the free market.  If this is the case, we are likely to see mortgage rates MUCH higher than they are now.  When this happens, we will see another drop in home prices as higher mortgage rates  will cause sellers to drop their prices.  The sad part about it all is that this is likely to happen when most of America feels that the housing market is finally getting better.

The most troubling issue I see is that it may take MANY years for the housing market to find a bottom and the whole time the government is going to continue to try to force average mortgage rates lower.  Well, the longer it takes, the more of a whiplash effect it is going to have.  We could see average mortgage rates go up two or three percent in less than a year if this continues.  Eventually the government is going to run out of ammo and the foreigners are going to stop buying our bonds and paper money.  It is very bad news when this happens, but maybe that is exactly what we need right now.

The cream always rises to the top; today this seems more true than ever as JP Morgan Chase reported that they have repaid their entire TARP funds.  This was a firm that really did not even need TARP money, but when the government is giving out free cash, why not take it right? Unfortunately, some of the financial institutions who received TARP money need it just to survive, eh hmmm, Bank of America and CitiGroup.

It is quite ironic that JP Morgan Chase has paid back all of their TARP funds while Bank of America and CitiGroup continue to struggle.  The irony is the fact that the Bank of America and CitiGroup CEO’s stated that they would repay TARP funds.  I guess those CEOs that keep their mouth shut and actually do their job are the ones that show the best performance.  I would like to commend JP Morgan Chase and I hope Bank of America sees what true leadership and honesty can do for a company.

I sure hope it helps America to realize that we should not attempt to buy everything we want rather than what we need.  The idea that everyone should own a home is just ludicrous.  Not only own a home, but an extremely nice home.  I think that this financial disaster we are going through will make sure this does not happen again.

As reported on Subprime Blogger way back in December, the commercial real estate collapse is inevitable.  Corporations are not willing to pay the high cost of rent when many of their business can be run out of homes or low rent buildings.  When driving through many major cities, you will notice that a substantial amount of skyscrapers are almost completely empty.  When you can see completely through a building and notice that their are no tenants, that is a sign of things to come.

Many rental units in major cities are seeing a decline in rent value as most major corporations are asking for lower rent or they are willing to close their doors or move.  Rite Aid and Starbucks are two major United States corporations that are willing to close locations if their rent is not reduced by at least 25%.  This is very bad news for everyone involved.  It is bad news for the major corporations because they have obviously been paying way too much in rent in recent history and they are likely to shut their doors on some high priced locations.  It is bad news for the individuals who own the properties because the value of their land and building have plummeted with this recession.

The property owners have one of two choices.  They can reduce the rent and hope that they create a figure that is accepted by the corporations or they can let the companies shut their doors and move out.  Several Rite Aids have closed throughout the country and much of it has to do with the high cost of real estate.  If Rite Aid is paying $40,000 a month to rent a premier corner and that particular store cannot turn a profit, they have no other options than to ask for lower rent or completely remove that store.

This is going to greatly hurt the retail industry as many people are going to lose their jobs and there will be empty buildings that litter the landscape.  You have probably all been to a town where there are empty drug stores on the corners of intersections and it is not a pretty sight.  Expect to see more of these as all retailers are doing their best to cut costs and reducing rent or closing stores will definitely do that.

Another major area of concern in the retail space is shopping malls, both indoor and outdoor.  Unless a mall is in a premier location and has devoted shoppers, it is likely that many stores are going to start shutting their doors.  Any store that is not part of a major chain is going to greatly struggle to pay rent in a shopping mall.  Retail sales continue to show a downward trend so most companies are forecasting that their sales are not going to pick up in the near future.  If that is the case, they need to decide what an acceptable rent would be to turn a profit.  Unfortunately, some companies would need ZERO dollars in rent to produce a profit and that is obviously not going to happen.

Expect to see many of your common mall stores shut down in the next six to twelve months.  Any retailer that sells an item that is not absolutely needed is going to find it very difficult to “pay the rent” in the current economy.  All high end clothing and furniture retailers are going to have to have a very loyal customer base to get through this troubling time.  There is no doubt that some malls will stay pack and be able to make money, but it will not be the way it was three years ago when malls were being built in every suburb of even mid sized cities.

Many of the buildings that are currenly being rented out were locked in MANY years ago before mortgage interest rates started declining.  I am sure many of the landowners have refinanced and gotten lower rates but even if that is the case, it is still going to be difficult to find tenants that are willing to pay the steep cost of rent when it is extremely hard to turn a profit.

Corporate office space will also see a heavy hit in this commercial real estate collapse.  Companies that had district offices peppered throughout the United States are likely to cut these offices back.  Many retailers have already created a plan to get the district staff in to much lower rent areas, possibly even into the stores in which they manage.  This will not be something that many district and regional managers want to hear, but most companies are willing to do whatever it takes to make money.

If district and regional offices start closing, landlords are going to have to find someone to take over that space.  For the next few years, it is very possible that many of these office spaces will remain vacant until corporations start making money or foresee their outlook as positive.  The only way this will happen is if the recession comes to a close and Americans start spending money again.

Daily mortgage rates news provides you with current information on the real estate and mortgage market.  Today’s article looks at the prospect of higher mortgage rates due to the increase 10 Year Treasury Yield

The correlation between the 10 year treasury yield and the 30 year fixed mortgage rate is undeniable.  Since Freddie Mac started documenting average mortgage rates back in 1971, the relationship between the 10 year treasury yield and mortgage rates is almost exact.  When yields increase so do rates; when yields decrease rates follow suit.  If this is the case then why has the 10 year treasury yield been uptrending since January but mortgage rates have been in a steady downtrend?  Government interaction!

Investor Glossary defines the 10 year treasury yield as

A 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. A 10-year Treasury Note is issued with a defined rate of interest, or coupon rate (for example 5% of the note’s face value). Every year, holders of the 10-year Treasury Note receive the coupon rate from the Treasury. After ten years, the 10-year Treasury Note matures and the owner is paid the face value. The percentage of that total payment that exceeds the 10-year Treasury Note’s market price, annualized, is called the yield. When the current market price for the 10-year Treasury note rises, the yield for the 10-year Treasury Note falls, and vise versa.

When the yield starts to increase, it is often a sign that the economy is getting better as investors are willing to put money back into the United States.  We are at a very unusual time in that the housing market remains in terrible condition and yields are rising.  The President and Federal Reserve Chairman were hoping to help the housing market by creating very low mortgage rates that would spark the interest of new home buyers.  Well, it looks like that is not going to be the case as yields are going to pull mortgage rates back to reality.

It will be very interesting to see what comes out of this situation.  Either the yield increasing is a prediction that the economy is going to get better and home prices will eventually increase due to the increase in investments and consumer spending or much worse will happen.  If mortgage rates head higher, the economy does not get better and home prices continue to slide, we could see a VERY long recession.  Every American has already felt the effects of the recession so far and it could get much worse.

Imagine home prices sliding even further and the amount of defaults continuing to rise.  This could definitely happen if mortgage rates get to 6% or higher.  The only reason there has been even remote interest in the real estate market over the last half year is because mortgage rates have been close to or under 5%.  Unfortunately, most of the interest that has come from mortgage rates being so low is in the form of refinancing.  What the housing market and economy needs is for NEW home buyers to come into the market and take some of the excess supply out.

New housing supply remains over 10 months which is well above the norm.  To see a stabilization in home prices new housing supply needs to get under six or seven months which doesn’t look like it is going to happen any time in the near future; especially if mortgage rates are on the rise.  To make matters even worse, the amount of defaults is continuing to rise as we are starting to see the second wave of resets.  Expect to see many Alt-A and other exotic mortgages reset in the next year which will be a HUGE problem for many home owners.

Overall, it looks like an increase in mortgage rates is inevitable.  This does not mean that you will not be able to get a very low mortgage rate.  As many of my friends like to tell me, if I could get that low of a mortgage rate when I was your age, I would have been estatic.  We have to realize that even if mortgage rates do add a half of a percentage point, they will still be at some of the lowest levels in the history of the housing market.  If you have been debating getting a refinance, I would strongly urge you to do it now before mortgage rates follow the 10 year treasury yield higher.

In other economic news, it looks like the restaurant industry is started to see a light at the end of the tunnel.  There is still contraction in the overall industry, but much less than over the past year.  Since the beginning of the year, that contraction is slowly working its way towards expansion.  Sadly, I think part of this is the psychology that things are getting better because the stock market has increased and our President keeps telling us he thinks the economy is showing glimmers of hope.  It will be interesting to see if there is heavier contraction after mortgage rates start rising again coupled with the decline in home values.

• Interest Rate Predictions Indicate Higher Mortgage Rate
• Mortgage Rate Trends Reverse Quickly; Rates Headed Higher
• Low Mortgage Rates Not Helping as Home Prices Slide In March

The one thing that all economists and market mavens agree on is that the economy is in horrible condition.  Just how bad of condition is up for debate.  One of the most intriguing questions that we can currently ask is will low mortgage rates help the economy?  The president and Federal Government sure seem to think so; they are sinking trillions into the theory that low mortgage rates WILL help the economy.

Ben Bernanke and President Obama have made it quite apparent that they feel the housing market is going to lead us out of this recession.  There is so much money and credit involved in housing that is is the number one influence on American’s lives in the current economic state.  The largest financial burden that most American citizens have is paying their mortgage each month.  It is also true that the largest financial decision most American adults make is which house to buy and how much to spend on it.

Unfortunately, many young adults have been told that buying a house is the best financial decision they can make.  Why is it the best financial decision?  The answer that most people give is because it is an investment that always goes up in value.  Well, that is not the case anymore.  The bubbles that were created in the 1990s and early 2000s prove that what goes up must come down.  If you were an unfortunate home owner who bought near the top in June of 2006, you are learning that the hard way.

Some markets are down over 50% since the top and it is likely to get worse as foreclosures continue to rise.  The government is doing everything in their power to make sure that foreclosures decline, but it is not working as they thought.  The amount of unemployment coupled with the decrease in home prices is absolutely killing some of the bubble markets such as Phoenix, Las Vegas and Miami.

There is little doubt that there is great money to be made in this markets many years into the future, but only the extremely smart individuals have money in the current economy.  All of those young adults who bought a home between 2006 and today are likely to be underwater in some of the major housing markets in America.  There is very little to do about this as there is no way to force home prices to go up.  You could renovate and make your house more attractive but that is taking even more money out of the wallets of people who are struggling to make ends meet.

With this situation being the case, isn’t it the case that low mortgage rates will help the economy?  I would argue that lower mortgage rates are going to do very little to help the economy.  If mortgage rates are at 2% and the unemployment rate continues to rise, will it really make any difference?  People need an excess of money to make big financial decisions.  If there is very little money being made in the current economy, who is going to be able to buy a new house?

Getting new homes off the market is the major occurrence that needs to happen.  Obviously many current home owners will refinance at lower rates and save some money that way, but are they going to use that money to buy another home?  I seriously doubt that to be the case.  They will use the money to stimulate the economy in some way, but it is highly unlikely that they will refinance at a lower rate and turn around and buy another house with their savings.  It is possible that some home owners will do that, but not enough to get the new housing supply under eight months.

The only way that new housing supply is going to greatly decrease is if there is a swarm of new home buyers that hit the market.  Well, now that college graduates are finding it harder and harder to land a solid job, who is left to buy up these homes?  Until there is a hiring increase throughout the country, it is hard to imagine that many recent grads are going to sink a huge amount of money into a house that could decrease in value as soon as they buy it.

Another problem with relying on recent college grads is the fact that many of them are already in debt because of college loans.  I have many friends that are relucatant to buy a house today because they want to pay off a large part of their college loans first.  They are also extremely scared that they are going to get ripped off or buy a home that sees a strong decline in value for the first few years that they own it.

Most college students have not studied the housing market or mortgage rates that much.  I would be willing to bet that many of them have no clue that mortgage rates are near historic lows.  I am sure there is a way to educate the future leaders of this country, but we have yet to figure it out.  Do not get me wrong, there are some college students that already own a home and are subleasing it out to their buddies, but those young entrepreneurs are few and far between.

Overall, I think the fact that college grads are struggling to find jobs is going to prove that low mortgage rates will not help the economy.  Low mortgage rates will spark the interest of current home owners who have been thinking about refinancing but that is going to do nothing to get housing supply off the market.  I know President Obama and Ben Bernanke think that housing will lead us out of this troubled time, but we truly need to create jobs to assist the current housing market.

If you are a recent college graduate who is looking for a job and you are debating to buy a home or not, please educate yourself to the best of your ability.  Do not let friends, family, mortgage lenders or tv shows tell you that you should buy a house.  Do your research and make that decision for yourself.

Over the last sixth months, most mortgage news articles have illustrated that mortgage rates have been steadily falling.  There is no doubt that this is the truth as rates have went from 5.92% to 4.81% in just one year.  This dramatic fall has been greatly aided by the drop in home prices and the subsequent assistance of the government.  When the federal government has committed to buying $1.25 trillion in mortgage backed securities we can only expect mortgage news to be reported about one thing; lower mortgage rates.

Now that mortgage rates are hitting historical lows, what does it mean for the common American.  Well, that is going to be determined by the financial decision you have made in the recent past.  I will be the first to admit that being extremely frugal and spending no money will not make anyone happy.  With that being said, it is not wise to spend every dollar you earn months before it is even in your bank account.  There must be a happy medium and those who found that happy medium before the subprime mortgage crisis are probably sitting pretty as far as finances are concerned.

If the loan-to-value ratio of your current home is less than 70% and you have a credit score over 740, you are likely to have the opportunity to refinance at extremely low rates.  Not only are you able to refinance at low rates, you will also get much lower rates on credit cards and vehicle loans.  The one thing that this struggling economy is doing is rewarding those who have made financially intelligent decisions.  Each and every day I get a credit card offer for 2.99% if I am willing to spend ANY money on the card.

I do not always take these offers as having too many credit cards hurts your credit score but it is very alluring to basically get “free” money because of the strong financial decisions I made in the past.  The same holds true with the mortgage market.  The government is forcing lenders to offers extremely low rates by keeping the Fed Funds Rate at basically zero which means the government is loaning money to the banks and financial institutions at no interest.  If the banks can get money at no interest then they are going to give it to everyday Americans at a very low interest rate.

Well, a very low interest rate will go to those who have earned it.  I think we all know friends and family who have tried to refinance in the last six to twelve months who have been told that their refinance rate is not going to be much lower than their original mortgage rate.  The old saying “what goes around comes around” definitely holds true in financial markets.  If you have made poor decisions in the past by spending money you didn’t have or avoiding taxes you are going to pay in this economy.

One of the most interesting aspects about mortgage news is the amount of media outlets that are now reporting on the real estate and mortgage market.  Almost every single major media outlet has an entire section or page just on housing and mortgage rates.  There have always been news outlets for this information but never so much as today.  It seems that every single day that front page news involves the mortgage market in some way.  When mortgage rates are consistently hitting an all time low the lenders are ramping up their advertising and pushing for media sources to stay on this topic.

The summer months are always a time when the real estate sees a bit of renewed interest from the public because most families move during these months so their children are not affected when it comes to their education.  “Homes for Sale” sees a pop in searches during the summer months and then fades as the fall and winter months roll in.  It will be very interesting to see if that is the case this year as the global economy is unlikely to recover that quickly.  If the Federal Reserve Bank continues to sink large amounts of money into mortgage backed securities as they have been, will the interest in the housing market continue?

The Fed sure hopes so because that is the point of committing $1.25 trillion into mortgage backed securities.  By doing this, mortgage rates are almost sure to go down which will cause a great interest in buying or refinancing a home.  We have already seen the increase in mortgage applications but it seems to be the case that most of the applications are for refinancing.  Refinancing helps many Americans put more money in their pockets but does it help the housing market at all?

I would argue that it does not.  The housing supply that has been the cause of this meltdown is still on the market.  If people are refinancing their current homes they are not buying new homes.  The only way to get the supply and demand back in balance is for Americans to start buying the homes in which no one is living.  Some would argue that if individuals are refinancing and saving money they are likely to buy a second or third home with the extra savings.  This may happen, but how many people are actually considering investing even more money into a real estate market that has lost them tens of thousands over the last three years.

Ultimately, mortgage news outlets report what is popular.  Right now the fact that mortgage rates are at historical lows is the most interesting thing that has happened in the housing market since the bubble burst back in June of 2006.  After all the negative sentiment for over two years many media outlets are trying to produce content that is uplifting to the American consumer.  There is no doubt that historically low mortgage rates are very good for most Americans.  If you are one of the Americans who has been very smart with your financial decisions take advantage of this opportunity and get the lowest mortgage rate of your lifetime.

Last week, mortgage applications rose due to the interest in for home refinancing loans.  Although overall applications were up demand for home purchase loans was down.  The spring is the peak of buying season so the hit that home purchase loans sees may be a strong indication of where we are headed in the housing market.  The Mortgage Bankers Association said its index for mortgage applications rose 2.3% last week.

In the same set of data the MBA stated that average mortgage rates dropped to 4.69% which is just above the all time low that was set in March.  Last year at this time rates averaged 5.9%.  Overall, the four week average of mortgage applications was down 6.4%.  It seems very clear that refinancing is the only thing carrying mortgage applications in the current market; very few people are buying new homes.

As many of us have said in the past, this economy is not going to get better until people start buying new homes.  With many loans set to reset in the coming months, it will be very interesting to see if there are any glimmers of home in the near term.  I personally do not see the overall housing market getting better as there is very little new money coming into the arena.   In all reality, there is much more money coming out as home values continue to drop and current home owners are refinancing at lower rates making their payments less.

On a side note, here is a very interesting chart on the S&P 500 as it relates to gold.  As many of you know, I am a firm believer that the commodities bull will extend for many more years and there is HUGE money to be made as inflation will hit hard.  If you want to invest in something besides real estate, now is the time to get into commodities.