This week mortgage rates ticked up a WHOLE .09% and the media is in a complete frenzy.  I have seen more “mortgage rates going higher” articles this week than I have over the last eight months COMBINED.  I realize that mortgage rates have been in a steady downtrend since October, but is a short term bounce higher really that big of a deal?  There is very little doubt that the 10 year treasury yield will bring mortgage rates higher, but do you really think the government is going to let them get that high?

I will answer that question for you, NO, the government will not let mortgage rates get to a point where the interest in the housing market is gone.  I know that free markets eventually work themselves out, but the government plays a huge role in where money is going in this country.  We have already seen Ben Bernanke sink over a TRILLION dollars into mortgage backed securities and I am sure it will continue in an attempt to keep mortgage rates low.

Even if mortgage rates do tick up an entire .5% they are still at levels most people would have died for in the past.  If you ask anyone over the age of 30 if they would have gotten a mortgage rate under 6% how would they feel, many would answer ecstatic.  We are in a time where mortgage rates are near histortic lows and we should take advantage of it.  Even if these are articficial mortgage rates that the Fed has pushed lower, they are still rates that are attainable to you and I.

The question is, why is the media so crazed about mortgage rates ticking up.  I honestly believe it is psychology.  For several months now all we have seen is that mortgage rates are LOWER.  We have gotten complacent with the idea that there has been a downward trend that has not been broken.  Now that rates have bounced a little bit and the yields are heading higher, the media wants to throw out something different.

To compound matters, the public is feeding into the frenzy.  If you do research on the searchs for mortgage rates, mortgage rate trends, mortgage rate forecasts, mortgage rate predictions, and other related searches, you will see a spike over the last week.  Human psychology is very interesting and just because something has changed a little bit has gotten the attention of almost all home owners.

It will be very interesting to see if these trends continue if mortgage rates head lower.  I am very surprised that there is such a great deal of interest but I cannot complain as interest in my field also makes me happy.  I would urge all of you considering getting a mortgage or refinance to get out there and educate yourself so you can lock in at some of the lowest mortgage rates in history.

At the beginning of March, President Obama set out to improve the housing market by creating the Making Home Affordable Plan.  The plan allows borrowers to pay only 31% of their overall monthly salary on their mortgage payment.  It also assists those who do not have a great deal of equity in their home to refinance at the historically low rates we are now seeing.  Later in the month of March, Ben Bernanke announced that the Federal Reserve Bank was going to buy up to $1.25 trillion in mortgage backed securities.

Both of these moves were made in an attempt to put a bottom in housing prices.  The mindset of our current administration is that the housing market will lead us out of this recession.  If Americans see their home price continue to plummet, they are less likely to go out and spend money to stimulate the economy.  If the opposite holds true and home owners see the price of their home start to appreciate they will be likely to spend rather than save.  Unfortunately, home owners have yet to see home prices bounce with any significance.

The Case-Shiller housing data for March was recently released and illustrates the fact that March was no better than any other month in the recent past.  With all the money being injected into MBS mortgage rates are going to fall which should put a bottom in home prices.  Since the beginning of March mortgage rates have steadily declined from 5.15% to 4.82%.  If low mortgage rates were helping the housing market, it should have started happening in March when mortgage rates started to fall and the Making Home Affordable plan was put into effect.

The Case-Shiller Index is a composite of twenty major US cities and shows prices changes versus the same month last year as well as month versus previous month.  The data for March showed that every single U.S. city in the composite was down versus last year.  The smallest drop was Dallas at 5.6%.  The month versus previous month data illustrated that only two cities were up from February to March; Charlotte and Denver.  To compound matters, these two cities were up only 0.3% and 0.1% respectively.  There were several cities down over 4% month versus previous month.

If the Making Home Affordable Plan and lower mortgage rates were actually helping the housing market, there is no way that only two cities should have risen in value from February to March.  If things were getting better, the majority of cities should have seen an increase or at least much less of a decline.  This month’s data also showed the second major United States city to break down over 50% from the all time highs of June 2006.  Las Vegas joined Phoenix as the two cities that have seen home prices lose over half their value.  It looks like Detroit, San Francisco and Miami are well on their way to this mark as well.

If low mortgage rates and the Making Home Affordable Plan did not work in March, is it likely that it will work in April or May?  I sure hope so!  This decline in home prices is absolutely killing the United States economy.  Anyone can get the false sense of hope that the current stock market is giving them, but until home prices bottom, we are not out of this mess.  My biggest concern is that there was a surge in mortgage applications shortly after Ben Bernanke announced that the Federal Reserve Bank was going to purchase such a large amount of mortgage backed securities.  If there was a true surge in individuals buying new homes, shouldn’t prices go up versus February when there were no plans intact and mortgage rates were around 5.3%?

What this data tells me is that the majority of those mortgage applications were actually refinance applications.  If most of the interest is in refinancing, it is likely going to be the case that home prices do not see a bounce.  Until new home buyers come into the market and gobble up some the the housing supply there will remain a supply/demand imbalance.  The government can try as hard as they want to control the prices of homes but the free market will work itself out.  If there is a strong demand for homes, prices will go up; if the opposite is true, prices will continue to sputter or head south.

It may take some time for the data to show that low mortgage rates and Making Home Affordable are working.  Maybe the application for the month of March is a bit delayed due to the surge in interest.  Many mortgage lenders were struggling to go through mortgage applications because of the great interest.  If some of the applications were not completed until the end of the month, the improved home prices might be delayed until April.  Unfortunately we will not know the answer to this for some time.

From a personal standpoint, I have yet to see home prices find a floor at all in North Carolina and I live in the state that has one of the cities that saw an increase from February to March.  I cannot imagine bubble states like California, Las Vegas, Arizona and Florida.  From what I have seen, individuals are still finding it very hard to find a decent offer.  Many of my friends and family are showing their homes that are on the market, but they are getting absolutely no offers.  Individuals who are looking at houses are not able to dump their homes in other parts of the country.

Overall, it seems that the government is doing everything they can to force low mortgage rates to help home prices but it just hasn’t happened yet.  This is not to say that it won’t eventually help, but the Case-Shiller March data showed that we have yet to see a true bounce in overall home prices.  Maybe the data for April or May will create a much more clear picture but we are going to have to wait quite awhile to know if this is the case.

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Mortgage rate predictions have been quite accurate in the last few weeks as I have correctly picked the bounce off of 4.78% and then two weeks later the reversal back to 4.82%.  I think we have seen an intermediate top in rates a few weeks ago when the Freddie Mac weekly survey reported that rates were at 4.86%.  I am sure many analysts and chart technicians feel that 5% will serve as a ceiling; I just do not see that happening.

With that being said, I think rates will continue lower next week but not by a large amount.  The Fed is still committed to purchasing mortgage backed securities but they have lightened up greatly with this commitment.  They are still going to fulfill the $1.25 trillion they intialed set out to buy, but it seems that they are going to do it in small increments rather than in large chunks.  By buying back MBS in smaller increments it means we will see gradually declines in overall rates rather than large fluctuations.

Last week’s mortgage rates came in at 4.82% which was just .01% off of my prediction of 4.83%.  This week I predict that we are going to edge even closer to that all time low that many media outlets have been talking about for months.  This week’s mortgage rate predictions are:

30 Year Fixed Rate Mortgage – 4.76%

If this were to happen, it will be very interesting to see how the national media takes it.  This would be about as close as we have come to an all time low since March and it would likely be national headline news if mortgage rates did break the all time historic record for lows.  There are sure to be many interesting perspectives that will come out of this if it does in fact happen.

Even if mortgage rates do not hit the historic low this week, it is likely that we will see it in the weeks to come.  The only reason we would see a true bottom in mortgage rates is if the housing market sees a drastic improvement.  Unfortunately that is just not the case in the current market.  Home prices are continuing to decline and we are still seeing an abnormally high number of foreclosures and short sales.

President Obama is doing everything he can come up with to make the housing market better but the economy is not helping at all.  Most major corporations are continuing to lay off workers and the economy is not getting stimulated by those who actually do have money.  It sure seems the case that those who do still have money are the ones who have always been smart with their financial decisions and saved.  It is these frugal individuals that are helping keep the economy afloat, but they are doing little to actually “stimulate” it.

The individuals that were stimulating the economy during the 1990s and early 2000s are the same ones that we would consider subprime borrowers today.  They are the ones who maxed out their credit cards and made sure that they had their hand in at least two properties.  It is now the case that this individual is broke and looking for a job.  Unfortunately, if they do not have a job, they are finding it extremely difficult to make ends meet as very few financial institutions are willing to cut them any slack because of their bad financial decisions.

It will be interesting to see if the frugal individual that has been saving from day one will actually do his or her part to stimulate the economy.  I honestly feel it is not in their blood to spend a great deal of money.  I have many friends who are this way and they will never make large purchases no matter how much money they have.  They will continue to drive the 2001 Honda Accord that they bought used.  They will continue to live in the same house even though they could afford a mortgage of at least $100,000 higher.

These particular individuals are the ones that could get amazing deals in the current economy.  As one of my best friends likes to say, “now is the best time to spend great amounts of money because everything is on sale.”  This is definitely the case as corporations are trying to do anything possible to make an extra dollar or two.  If you have been thinking about taking a vacation, this year might offer the cheapest vacations ever, even to exotic locations.  If you have thought about buying a new car or boat, this might be the year as many of these companies are going out of business.

Most activities and objects that cost over $2500 are greatly discounted in the current economy; including houses.  The excess amount of housing inventory on the market is causing prices to plummet.  If you have been considering buying a house but have been reluctant in the past; this may be the year for you to buy that house.  Many home owners that are trying to unload homes are willing to take an offer well below the listing price just to get some money out of the house.

Now that you know mortgage rates are likely to head lower, it is a great time to start zeroing in on the exact house you want.  Even if the price is not exactly what you want, you may be able to wait a few months and over a price that would be well within your means.  It is not likely homes are flying off the market left and right so make sure to be patient with your decisions.

There is an unbelievable amount of information on the internet so please do your best to educate yourself before going into the home buying process.  By doing a quick google search and looking through some mortgage blogs you will do yourself a huge favor.  It may save you $10,000 in the long run if you actually take these steps early in the purchasing process.

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It seems obvious that President Obama does not want to tax the citizens any more than possible so this is out of the question.  All that remains is to print as much money as possible.  Basic supply and demand states that the more you have of a good or service, the less it will be demanded, hence the value will decrease.  If there are only three houses on Lake Smith then it is likely going to cost over a million dollars to get one of those houses.  If a home builder comes in, clears land and builds over 1000 houses on Lake Smith, the value of all the previous homes will decrease.

This is how supply and demand works even with currency.  If the government is going to print over $1 trillion dollars in an attempt to buy long term treasuries and mortgage backed securites it is well within reason that the value of the dollar is going to greatly decline.  If we see the value of the dollar decline, as it has since the beginning of March, we will see inflation.  Inflation will rear its ugly head in the form of higher prices for consumers.

We will see an increase in the price of goods that it takes to make many of things we use in everyday life.  I would fully expect to see the price of most commodities increase.  Copper, silver, gold, nickel, platinum, crude oil, agriculture and almost all other commodities will see a spike in prices due to the steep decline in the United States dollar.  I have been saying for months that this would be the case and I hope some of you put some capital in these commodities as you are likely to see huge gains over the next five to ten years.

For the first time in quite some time we saw a steep sell off in the United States stock market coupled with the selling of bonds and the US dollar.  It has been that case that this has not happened since the market bottomed back in March.  If there was a selling of bonds, the market went up.  If one direction was created by bonds or the dollar, the opposite happened with the market.  Now, we are seeing all three selling off and this could be the sign that the is much more ahead.

If we see rising inflation, we are also likely to see rising interest rates.  This is something that we have not seen at all during this recession.  So far, this recession has been quite unique because we have seen a deflationary period and low interest rates.  It is going to be hard to imagine just how bad the economy will get if we have rising interest rates and inflation.  I know many analysts feel that things are getting better, but if we see inflation come to fruition before we are out of this recession, that is very bad news.

When doing some technical analysis of the United States stock market, we find ourselves at a huge resistence level.  The 200 day moving average of the S&P 500 is 936 and we are currently at 887.  It would be no surprise at all if we saw the 200 dma serve as the last gasp in this secular bull market.  Since March, the market has made a beeline higher and we are going to eventually see a pullback.  The question that must be answered is “is the pullback going to show lower lows than those of October and November of 2008?”

I think so!  Unfortunately, there is very little data that proves to me that this economy is getting better.  We have yet to see any signs that the unemployment rate is getting better.  Businesses in all sectors continue to cut jobs.  Recent college graduates are finding it very difficult to get an interview, no less a job.  If all of these things are reigning true then how is the economy getting better?

The worst part about it all is the fact that the increase in the stock market and the positive outlook from the media may have given too many people false hope.  The worse thing you can do to a human being is give them false hope.  I have many friends and family members that truly believe that the economy is getting much better so they are going out and spending money on things that they always thought were attainable in a good economic period.  Open your eyes people.  I think we can all name at least ten of our friends who have been laid off or who cannot find a job.

This economic crisis has a very strong chance of getting worse.  If the government continues to devalue the dollar and unemployment continues to rise, how is the economy going to get better?  Unfortunately the government is not allowing free markets to work.  If the government would keep their hand out of the pot, let people and businesses go bankrupt and flush the system of all the “turds” the economy would get better.  It would definitely take time, but MUCH less time than it is going to take if we continue to prop up the entire country.

If you have money to invest in the current economic state, I would suggest commodities.  Ticker symbols DBA, DBB, DBP and DBE are all good choices.  If you want to invest in particular commodities, check out USO, GLD, and SLV.  It is likely that the recession is going to continue with rising interest rates and rising inflation so take advantage of the investment opportunities.

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Earlier this week I had the “feeling” that rates would drop without any true reasoning.  Just like it is described in the book Blink, sometimes you just need to go with your first thoughts or feelings about an issue.  There was no real justification as to why I felt rates were going to go down, but after two weeks of upticks and with the overall trend being down, it was time for a reversal.  The Fed continues to buy mortgage backed securities but has lightened up with the amount in recent weeks.  Making mortgage rate predictions in the future might get a little harder as the Fed might be running out of bullets.

Freddie Mac reported that weekly mortgage rates came in at 4.82% which was .01% lower than the Subprime Blogger prediction.  This is not an all time low but a few more weeks of steady declines will get us to an all time low.  You can be rest assured that if rates do hit an all time low that the media will be all over it.  You will see advertisements all over tv, magazines and websites with titles such as “lowest rates in history; refinance now!”

Just because average mortgage rates are low, it does not mean that refinancing and buying a new home will come easy.  The old adage that I always use is that if “everyone” and their brother are doing it, it is likely not the best decision for a smart investor.  If everyone and their brother think that mortgage rates are going to cause the housing market to bottom, it is VERY likely that we will see another downward movement in home prices; this time it will likely be because of the commercial real estate collapse.

If you are armed with this knowledge, you will be better off in the long run as you will be unlikely to get suckered into a deal that seems “unreal.”  I have had many of my friends and family that feel the deals in the real estate market are unbeatable and that we all must buy as much as we can right now.  Um, if that is the case, shouldn’t the smarter and richer people in America be sinking millions of dollars into the real estate market?  As always, buyer beware when it comes to the “best deals in history.”  If it is too good to be true, then more than likely it is!

Please make sure you go into your mortgage brokers office with a strong knowledge of the current trends in your market.  Each market in America is a little bit different but a quick Google search and a couple hours will give you a sufficient amount of data to be a smart buyer.  Do not let mortgage broker pull the covers over your head when it comes to the current mortgage market.  Many of them may tell you that things are getting much better and now is the time to get a new home as there won’t be many left on the market in the near future.  All you have to say to that broker is; “look at the new housing supply chart!” Also, you can always come back to Subprime Blogger for advice and mortgage rate predictions.

UPDATE: The most recent mortgage rates forecast article can be found here: Mortgage Rates Forecast – Interest Rates Stay Around 5.15%.  Mortgage rates have been quite volatile lately so it is a good idea to stay ahead of the crowd by knowing where overall rates are going.  Make sure to use Subprime Blogger to get all your mortgage rates information. 

The July 19th mortgage rates forecast article is available here: Mortgage Rates Forecast – Where Will Interest Rates Go in August? The 10 year treasury rate got a huge bounce of over 10% last week so that means average mortgage rates are headed higher. How much higher are they headed? Check out the article to find out!

The July 5th edition of newest mortgage rates forecast is available here: Mortgage Rates Forecast – Rates Move Higher This Summer? I personally think that we are likely to see mortgage rates move higher over the second half of the summer as the 10 year treasury rate is at a strong support level.  The government will do everything in their power to create artificial mortgage rates, but eventually the market is going to set interest rates.  For the sake of the overall economy and the health of the housing market, we should hope for low mortgage rates, but it doesn’t seem likely at the moment.

July 3rd – The newest article for current mortgage rate trends is available here:  Mortgage Rate Trends – Will Rates Go Higher in July? The month of July is going to be very interesting for average mortgage rates as the 10 year treasury rate is near the bottom of its upward trend channel.  If the 50 day moving average holds as strong support, we could see the 10 year moving back towards 4% which would mean that daily mortgage rates could reach 6% before the end of the summer.  Only time will tell, but it will be interesting to see what happens after the July 4th Holiday Weekend.

June 29th – This weeks mortgage rate predictions article has been published here: Mortgage Rate Predictions – Rates Find Support this Week? Remember that on Subprime Blogger we are going to release daily mortgage rates and how they correlate to the to 10 year treasury rate; please check back in every morning to get a prediction of where rates are headed based on the daily trading moves of the 10 year treasury rate.

June 23rd – I recently updated my newest article on mortgage rate predictions, please check it out and share with friends: Mortgage Rate Predictions – Rates Remain Stable

Mortgage rates jumped to 5.29% this week, June 3rd, and seem to be headed higher.  Make sure to stay up to date with mortgage rate predictions and mortgage rates forecast so you know where mortgage rates are headed.

June 6th – There is no denying that the 10 year treasury yield is continuing its uptrend so it looks like the mortgage rates forecast is an uptrend in rates that is going to follow the yield.  I would be very surprised if rates buck the trend that the yield has created.  The question that me must now ask is “is this good for the overall housing market?”  If mortgage rates go up, home prices are going to fall, but haven’t home prices fallen enough to help this market?  If you are trying to sell a home in this housing climate it is going to be very interesting to see how you fair.  I wish you the best of luck, but you are likely going to have to lower your offer due to higher mortgage rates.

May 19th – Today we learned that new housing starts and permits came in unexpectedly low.  Housing starts were down 54% when compared to last year.  Some feel that this is showing that the housing market has not stablized.  Honestly, this is the BEST thing for the housing market.  Builders should have slowed housing starts a long time ago before the new housing supply got all the way up to TWELVE months.  We have to get rid of the inventory we have before we start building even more.

If we continue to see new housing starts and permits lower, it will be a very good sign that the home builders have finally figured out that there is a supply/demand imbalance in the market.  I am not really sure why it took so long for the homebuilders to realize this, but that sure seems to be the case.  Overall, this is great news for the housing market but not so good news for mortgage rates.

As soon as the government starts to see a stabilization in the housing market, they are going to stop buying mortgage backed securities which has caused mortgage rates to plummet.  While this is something that may happen in the distant future, it is going to take SEVERAL months of lower housing starts before this takes affect.  With that being said, it is still a great time to go out and get that first mortgage or to refinance your current one.

Yesterday I posed the question “What is the Fed’s Next Move with Mortgage Backed Securities?“  The answer to this question will help to determine exactly how low mortgage rates will go.  Unfortunately, none of us can legitimately answer the question.  We can make strong guesses, but the overall economy is going to dictate what happens in the near future.  Well, if the record foreclosures in April is any indication, it looks like rates could go well below 4.5%.

I don’t think many of us knew what the subprime mortgage crisis would do to this economy but now we are sure seeing it.  It is unfortunate to most but quite fortunate to others.  Those who saved their money and did not lose the majority of their capital in their home and investments are going to get unbelievable deals.  Mortgage rates are already under 5% are are likely to head lower; no one would have even imagined about financing a home for a rate this low several years ago.  Some of the unfortunate ones who were not wise with their money are now facing foreclosure and bankruptcy.

If you have money to spend, now is definitely the time to buy as rates are extremely low and EVERYTHING is on sale; well, almost everything.  You were smart with your money, now its time to enjoy the fruits of your labor!

After several weeks of cutting back on buying mortgage backed securities, the Federal Reserve Bank has to decide what their next move is going to be.  If they continue to slow their purchases, it is likely that mortgage rates are going to slowly rise which will diminish the interest in the housing market.  If they continue to sink large sums of money ($50 trillion) into MBS mortgage rates are sure to go down, but has it even made a difference so far?

We do not have the Case/Shiller Index data from the months in which mortgage rates were under 5%.  The data available is from February and that continued to show decline in home value; a 31% overall decline from the top in June of 2006.  Everyone can make their own assumptions as to what has happened since February, but has anyone seen a rise in their home value?  Honestly?  I would say only a very select few markets have even seen a stabilization.

Well Ben Bernanke, this is what you get paid to do, so let’s hear what the next move is…

Knowing that the Fed scaled back greatly this week, I personally feel this is a week we are likely to see a slight uptick in mortgage rates.  Last week’s survey showed overall rates coming in at 4.78% which is one of the lowest readings in history.  This weeks mortgage rate predictions:

30 Year Fixed Rate Mortgage – 4.84%

Freddie Mac’s weekly survey reported mortgage rates at 4.84%.  It seemed quite obvious to me that the scaling back of MBS purchases would support higher mortgage rates.  Mortgage rates only bounced .06% but MANY financial gurus continue to predict mortgage rates to free fall each and every week.  Now that we have seen a short term bounce in mortgage rates, will the Fed amp up their MBS purchases to make sure rates continue their overall slide?  We will be the first to let you know the the Federal Reserve Bank releases the data depicting how much they dumped into mortgage backed securities.

Even though we got a short term bounce, it is still one of the best times in history to refinance or buy your first home; IF you can qualify and get through the mortgage application steps.  Do not be naive and think just because your credit is ok that you will be able to get a mortgage rate under 5%.  Realize that you need to be on very good financial ground to get the advertised rates you have seen.

Mortgage Rate Predictions

He continues by stating that “an important caveat is that our forecast assumes continuing gradual repair of the financial system.”  Then Mr. Bernanke reiterates that banks will have the “assurance that equity capital from the Treasury under the Capital Assistance Program will be available as needed.”  WHAT?!?

So first you tell us that the housing market is beginning to stabilize.  You then proceed to tell us that all your economic forecasts are dependant on the gradual repair of the financial system.  You ice the cake with the grand finale that the Treasury will continue to provide capital for the banks.  Oh yeah, the economic outlook is definitely looking bright!

Well, I guess Ole Ben gave us an economic outlook but it is solely dependent on the financial system.  NO SHIT!  I think anyone who can speak English could have told us that.  “The outlook for this economy is dependent on the repair of the financial system.”  What knowledge and research has been bestowed upon us?!?

Well, now that we know the sky is blue I guess we can assume that Ben and his misfits will continue to sink trillions into mortgage backed securities which should send mortgage rates lower.  The Fed eased greatly on the amount of purchases (ONLY $5 billion) last week so mortgage rates might not decline as much as usual over the short term.  Overall we should still continue to see rates fall.