Houston We Have A BIG Problem!

If it isn't bad news we have no news in today's environment. Let me put this bluntly, aside from January we have gone from the best mortgage rates of the year to the worst in just over 30 days. Since September 8th we have lost almost 400 basis points in mortgage rates. Essentially that is well over a point (actually over 1.25%) increase in mortgage rates in just over 30 days! If you are an avid reader of this blog you may remember my post earlier in the year about seeing the biggest volatility in mortgages rates in over 10 years. Well, this just crushed that synopsis!

If we want to have ANY hope of getting out of this economic mess we need the housing market to turn. You CANNOT have a housing market recovery if mortgage rates are approaching 7%. Donald Trump said it best yesterday, "the biggest impact on the economy is the housing industry not auto's, government, infrastructure or energy it's the darn housing industry." It's simply too bad that something like this has to happen in order for the average citizen, city, state and national government to realize that the housing market is the driving force behind all that is good in a "normal" operating vibrant economy! The MBS market must regain some confidence in order for these rates to turn around. (The good news is as fast as they have turned bad, they can turn around). We need rates to get more in line with what is going on in the economy in order to pull out of this mess! Technically I understand why they are going the other way, but it makes no sense for the powers to be to let them continue down this path. Not while they are making monumental strides to fix the economy! It only makes sense to address the MBS market and mortgage rate issue if you want Housing to begin a comeback!

As if this news isn't bad enough, we also learned more today. Retail sales fell off a cliff recently with almost every entity seeing significant declines. Retail sales fell 1.2%, core retail sales (excluding building materials, autos and gas) fell by .7% the largest decline since September 2001. Sales at furniture and home furnishing stores fell by 2.3% in September, the fourth straight monthly decline and the largest single monthly drop in more than five years! Discretionary items fell by 1.1% for sporting goods, hobby, book and music stores. Restaurant patronage fell .5% the most since January 2007 (-1.1%). The auto industry continues to struggle, although a it's on the back burner compared to the housing crisis, as sales declined another 0.6%.

We are now at higher mortgage rates, spreads (between treasuries and MBS) and bank borrowing costs than we were pre-conservatorship of Fannie and Freddie. It's a very tough time to be even associated with this industry as today is the 8th straight day of rising rates and the horrible news that always seems to be associated with it.

Let's all pray this trend doesn't continue!

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Your Columbia Missouri Mortgage Broker