Rate Watch 12/1/2009

You may have been busy eating last week …

But I was vigilantly watching interest rate activity.

I was. Really!

Well, last week we saw the lowest fixed interest rates in six months — due to the following two things…

The first was the news of Dubai’s possible loan defaults. In any financial crisis which effects a large portion of global investment dollars, countries tend to park their money in U.S. Treasuries. Because Treasuries are still considered extremely safe. This actually has a good effect on mortgage rates.

The second reason was that weakness in the dollar is also keeping a lid on inflation pressure. See, inflation is the enemy of Mortgage Backed Securities, so any inflationary economic data is bad for rates.

And we’ve had  few items that should have sent Mortgage Backed pricing reeling, but for now, rates are great.

However, please bear in mind that there is no compelling reason for interest rates to go lower or for this pricing to continue long-term.

This is a very temporary situation, so act soon if you ought to.

Jumpin’ housing data!

The pundits are watching existing home sales, which shot up 10.1% in October. And this was the highest level in two and a half years.

The National Association of Realtors reported that our median home prices had the smallest decline in over a year. New home sales also up 6.2%, to reach a new 12 month high. The Commerce Department reported that new home sales hit annual rate of 430,000 with the strongest sales coming from the South.

A little while back, I mentioned that new home starts were down. Remember, when inventory is reduced, demand is increasing and this helps home prices in the long run.

Finally, the Standard and Poor’s/Case-Shiller Indexes were released. This report showed home prices rose for the fifth straight month. This is a composite index of 20 metro areas and showed a price increase of 0.3 percent.

Not a big deal, but the direction is good.