As the stock market retraced to its 1997 level, mortgage markets improved last week -- but not by much. Mortgage rates closed out the week slightly lower, but the week wasn't without fireworks.
- Calls of deflation grew louder
- The automakers left Washington without a bailout
- Citigroup's stock price fell to the equivalent of its ATM fee
Separately, each of these elements would have created confusion on Wall Street. Together, they created near chaos. Stocks traded at a pace last week that has never been equaled.
As a result, mortgage rates were volatile, too.
Over the 5-day workweek, multiple mortgage lenders issued 11 distinct rate sheets, meaning that consumer mortgage rates changed every 3 hours, 38 minutes on average last week.
This is why home buyers should rate shop quickly. Wait too long and the mortgage rate is gone. And, this week doesn't figure to be any less volatile.
To start, it's a holiday-shortened week. Fewer traders will be working as the week moves forward, making the Price Discovery process more difficult. With fewer active buyers and sellers, wild price swings are likely, and mortgage rates should feel the impact.
Next, markets will debate the Citigroup Bailout, wondering whether this will (finally) mark the market bottom. It's a conversation about which Wall Street never tires, and with each bit of optimism, money should flow into stocks to the detriment of mortgage bonds and mortgage rates.
And lastly, there are 9 economic releases crammed into Monday, Tuesday, and Wednesday of this week, including two housing reports and an inflationary gauge behind which the Fed puts a lot of credence.
Signs of stabilization should buoy both stock markets and mortgage rates -- Wall Street is craving balance of some sort to carry it into the New Year.
There are no Fed speakers scheduled for this week so watch for data and market sentiment to lead the markets. For rate shoppers, this means more rate sheets.
(Image courtesy: The Wall Street Journal)
