Hello!

Yesterday,

FNMA 4.5% lost just 16 bps...but is DOWN 159 basis points from last Friday. 30 year fixed money is still under 5.5% though.

Joblessness is on the DECLINE. For the fourth week in a row the "4 week average" of initial unemployment claims has gone down.
The BETTER news: by the time it starts showing UP on reports: recovery is well underway.

Bear in mind thought that OVER 1/2 MILLION people DID file for unemployment last week (550,000 or so people.)
This would be incredibly SHOCKING were it not for the consistent fillings of this magnitude over the last several months.
We have become numb.

Feds purchased $19.1 billion in Mortgage Backed Securities last week...which is a few billion less than they have been purchasing.
Partially due to the great rally in bonds last week.

This morning:

Jobs report came in showing "only" 9.4% Unemployment...vs the 9.6% that was expected. Because this was "better than expected" news, money is moving into stocks.

We are DOWN ANOTHER 72 bps on our FNMA 4.5% coupon RIGHT NOW and rates may bump up today.

Remember: RATES ONLY AFFECT purchase power...and the number of "emotionally" available buyers...but the buyers who are earnest: will still buy.

Example: for every 1/8 increase in rate...the cost monthly increases by about 8 cents/thousand borrowed...so higher rates equal higher payments.
Some borrowers are eventually priced out of the market.

Note: EVEN if the price of homes comes down: AS rates come UP a person will pay the SAME monthly and in the long term.

Those who truly believe in home ownership will continue to buy no matter what the rate is...but will just buy less home.

Higher rates could drive home values down further because of the lack of buyers at certain price points.

In some respects, we have prolonged this inevitable with the artificially low rates and
things could actually be a little tougher when we finally allow the market to adjust itself.


Chad