29 Oct 2010 – The past week once again gave me pause as to the duality of my job. Pricing for Fannie Mae and Freddie Mac mortgage loans increased slightly over the prior week. For that, I shed a tear, since this can put some drag on the very robust refinance market. This movement, however, was primarily driven by market reaction to some positive news in two areas of the economy essential to overall recovery, i.e. employment and housing. While it would mean the end of crazy, low historic rates, this data could signal a sustained reversal of the financial ugliness of the last few years.

In housing, the sale of existing homes increased. This not only means that the purchase market is beginning thaw, but also that there is hope that the excessive inventory of homes currently on the market could begin to shrink. This is extremely important as significant inventory reduction is the only way to regain the loss in property value that we have seen over the past few years. It should be noted, however, that while the number of homes sold did increase, the price of the homes sold decreased in many areas of the country. This should represent a sign to potential buyers that while we are still firmly in a buyer’s market, the best prices could evaporate as the market recovers.

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Employment is widely considered the primary aspect of the economy needed for sustained recovery. Most new foreclosures and mortgage late payments are not the in-over-their-head scenarios that dominated the beginning of the housing crisis. On the contrary, the recent problems are more related to families who have been paying on time, but have lost jobs as a result of the continued poor economy and have exhausted reserves. Only by getting these and other job seekers back to work can we expect foreclosures to stabilize and I am glad to report that this week employment improved. Specifically, the number of applications for first time benefits dropped by 21,000 to 434,000, which was not only a significant improvement from the previous week, but also a number well below expectations. While this trend needs to continue for us to claw our way out of the current economic abyss, every little improvement helps.

I am recommending that my clients closing in 15 days or less from today LOCK. For those closing more than 15 days out, I would suggest FLOATING for now with a watchful eye on the markets for the best opportunity.