Currently we are seeing mortgage rates rocketing up into the mid 5% range for a 30 year fixed mortgage. Just 10 days ago rates where nearly 1% less for the same 30 year fixed mortgage. We are now beginning to see the impact of all of the resent Government spending.
As the Feds continue to offer Treasury Bond Auctions nearly every few weeks is now beginning to affect the supply of available bonds. The continued pressure of available bonds for purchase will drive up rates. This is due to more supply than demand on a daily basis and you have had a recipe for lower Mortgage Bond prices. Keep in mind that Lower Mortgage Bond prices equal higher Interest Rates. The high the rates will reduce the available pool of home buyers due to debt to income ratios.
Here is what happened in the Bond Market today;
- Mortgage Bonds took another beating today after the Non-Farm Payroll report was reported at minus 345,000 versus the minus 520,000 that was expected.
- The supply of Bonds coming out of the government and more supply than demand on a daily basis and you have had a recipe for lower Mortgage Bond prices.
- The Unemployment Rate ticked up to a 26-year high of 9.4%.
- The benchmark 4.5% fell 81bp closing at $98.19.
- Stocks closed near unchanged levels as the S&P 500 hasn’t been able to close above a 7 month resistance of 944 closing at 940 down 2 and fractional points.
- The Dow managed a small gain of 12 points to end at 8,763, while the tech heavy Nasdaq was near unchanged at 1,849.
- Oil on the NYMEX fell 41 cents to $68.39/barrel in extended hours trading.
The Federal Governments spending is now beginning to hurt the average home buyer. There are many possible solutions available but throwing money at the credit crunch issue seems to be the answer for now. Bush asked for and got 750 Billion and spent half of that money in the form of bailouts. Obama came in and spent the balance along with another 800 Billion and counting.
I have offered my office staffs services several time and at a considerable cost saving for ideas on how to fix the Mortgage Crises. I will offer up one idea here to think about. The Fed’s need to stat that they will support the Dollar and continue to purchase Mortgage Backed Securities. No one is beating this drum. Why would another country invest in Mortgage backed Securities if we wont? Talking the talk on a good will tour will not get it done. We need to walk the walk.