Mortgage Market Recap for the Week Ending 11/14/08

Look at the candlestick chart below of mortgage backed securities. And use your imagination … it’s a roof pitching down to the right. The peak of the roof is there in early September … the current week is the support on the right.

That’s taking a larger view than just this week … so let’s focus in on this week first.

The all critical 200 day moving average couldn’t hold on this week - the good news: in spite of this bad news, the fall wasn’t far. Mortgage Backed Securities (MBS) closed today up 12 basis points on the day (from yesterday’s closing) - that’s progress … in between the progress is a bit of bad news: MBS’s started the day above (the 200 day MA) and fell for the day. The 10 day and 40 day moving averages appear to be providing support - though they’re technically beneath the closing price.

You could call this week a slow slide sideways with a mild downward trend.

Speaking of downward trends - through all the excitement over the last two months - you can start to see a larger trend forming. It’s not such a great trend. Look to to the tops of the candles since early September. See how they keep getting lower and lower? That trend line seems to be pointing to higher lows on the mortgage interest rate front as long as this trend line holds.

I was reading the Kiplinger forecast and tax letter this afternoon. They’re projecting 2 Million jobs lost in ‘09 and unemployment at 8% in December of ‘09. If that’s true, you’d tend to believe that mortgage rates would moderate and move lower in that kind of economic environment as long as inflation stays in check.

Given the recent excitement in the financial markets - and the general failure of the financial markets (including the bond market) to behave as I would typically expect it too - it’s not wise to count on anything moving forward. My best advice: seek advice about buying or refinancing early - and make a plan for what you want to do (e.g., refinance at X%) then get your application in and hang tight for the markets to cooperate!

30-year fixed rate mortgages closed the week out at 5.875%

Thanks for reading!

I’ll post back soon,

Ken