mortgage market place update

Last Week in Review

NO PAIN...NO GAIN? While that old maxim is often the case, for the past week the Stock market's pain has been the Bond market's gain. Last week, the Dow lost around 500 points - and as money flowed out of Stocks and into Bonds, this helped home loan rates improve by .125 - .25% over the course of the week.

But if you want to revisit some real Stock market pain, just dial back the clock twenty years from last Friday. On October 20th 1987, the Stock market suffered its very largest one day loss ever, with the Dow falling 508 points and losing 22.6% of its value overall. That's like the Dow losing over 3100 points today! And just prior to that wild meltdown, 1986 and 1987 had been banner years for the Stock market - fueled by hostile takeovers, leveraged buyouts and merger mania.

The rest of the economic news for last week was a mixed bag, including lower than expected Housing Starts and Building Permits for new construction homes, and also an overall tame read on consumer inflation via the Consumer Price Index.

BUT IF YOU HAVE SOME OF YOUR OWN BUILDING PROJECTS YOU'D LIKE TO START AROUND THE HOUSE...YOU WILL BE ESPECIALLY INTERESTED IN THIS WEEK'S MORTGAGE MARKET VIEW, WHICH HELPS YOU UNDERSTAND WHAT KIND OF REMODELING PROJECTS CAN BRING THE MOST RETURN.

Forecast for the Week

While it will be interesting to see how Stocks fare next week, and if they will continue to slide lower - the week ahead also brings some potentially market moving economic reports. Existing Home Sales will be the headliner on Wednesday while Durable Goods Orders, weekly Initial Jobless Claims, and New Home Sales will arrive on Thursday. If the news of the week is very negative for the economy, Bond prices could move higher still and bring more improvement to home loan rates.

Remembering that home loan rates improve when Bond prices move higher, the chart below also shows some encouraging "floors of support", just underfoot where Bonds are trading right now, which should help them hold their current ground and perhaps even improve. But if the Stock market rallies and reverses course to move higher, this could quickly cause Bonds and home loan rates to worsen.