Mortgage Markets In Review : January 5, 2009

Soaring unemployment rates may lead to more stimulus, hurting mortgage rates Like the rest of the country, mortgage markets were on semi-vacation last week. The low trading volume led to wild rate swings.

After beginning the week vastly improved, and capped by a terrible late-Friday run, mortgage rates ended the week unchanged for the second week in a row.

This week, though, it’s anyone’s guess. Wall Street comes back to work in force and, in the time since they’ve left, there’s been a lot going on:

Holiday sales were even slower than expected
Consumer confidence touched an all-time low
Gas prices spiked nationally — by as much as 40 cents in some areas

Ironically, Wall Street will likely position the bad news as good for the stock market. This is because negative economic data pressures Congress to pass larger, more sweeping stimulus in 2009. However, what’s good for stocks is often bad for bonds and that’s the market from which mortgage rates are derived.

In fact, it was an exceptionally weak data point Friday that helped start the January 2 stock market rally that, consequently, caused mortgage rates to bulge.

This week, there’s only one high-profile data point to watch — Friday’s jobs report. Economists are predicting the another 475,000 Americans lost their jobs in December and that the Unemployment Rate reached 7.0 percent.

If the actual numbers are in-line or worse than the predictions, mortgage rates could rise on the same “More Stimulus” line of thinking.

If the jobs data shows strength, however, don’t expect that rates will fall. For now, markets are in a defensive stance about the economy and tends to work against rate shoppers and home buyers.

(Image courtesy: The Wall Street Journal Online)