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Looking Back And Looking Ahead : December 1, 2008


Despite soft housing numbers and evidence of a slowing economy, mortgage rate shoppers found reason to celebrate:

These 3 elements helped drive mortgage rates to their lowest levels since January 2008 — in some cases shaving a full percentage point off the offered rate.

Homeowners responded to the dip and refinance activity reached “a frenzy“. As evidence, at least one national mortgage bank reported more loans were locked on Tuesday, November 25 than for the first 24 days of the month combined. Anecdotally, other lenders saw similar action.

However, low rates rarely stick around.

The last time that rates like they did last week, markets recovered within a week and rates returned to “normal”. This week provides ample chance for that to happen again.

Throughout the early part of the week, 5 members of the Fed will make public appearances, including Fed Chairman Ben Bernanke. With the Fed’s next meeting scheduled for December 15, markets will be looking for clues about how the Fed may change the Fed Funds Rate.

When the Fed Funds Rate falls, mortgage rates tend to rise on the news.

Then, on Thursday, retailers start announcing their “same store” sales figures for November. This will clue us in to the true health of the economy because consumer spending accounts for two-thirds of it. If same-store sales are dramatically lower, expect calls for a large Fed Funds Rate cut.

And lastly, Friday brings us the jobs report. As terrible as the employment reports have been this year, it will take an especially higher number of jobs lost in November, or an exceedingly high Unemployment Rate to have much of an impact on mortgage rates.

This month, weak jobs data should be harmful to mortgage rates because more out-of-work Americans may lead to more mortgage defaults nationwide, plus additional Fed Funds Rate cuts.

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