Morning Market Update

Well, my daughter’s off to the airport and I’m on my second Diet Pepsi trying to get things rolling for the day.   Here’s an overview of what the markets did yesterday and what we can expect today:

• Volatility - remember what I said in my Mortgage Market Week in Review on Saturday about this being a light trading week and therefore one with increased volatility?   Well, the mortgage backed securities were all over the board yesterday.  
• House Prices - Case Shiller released their report for the month of May (it takes them about a month to compile the data) and it showed that, surprise, house prices were down.   But the potentially important thing is that the pace of the price declines is slowed in May.   Like I was explaining to a friend last night, for the market to turn around, we first need the pace of declines to slow, then we’ll get to a point of leveling off.   Once we’ve seen house prices stabilize, then we can put the issue of low appraisals behind us because values will be stable.   At that point, we can start building toward a market where house prices can actually start appreciating.    Does one month make a trend?   Absolutely not.   But if we have 3 to 6 months in a row of the same type of slowing in price drops, that can actually lead us to believe that we’re heading into the L shaped recovery where there’s quite a time gap beween the “front end” of the “L” and the back end of it.   Sort of like this  L________/    So we’ll keep watching 
• Consumer Confidence was down in June.

In spite of all of that, rates on Tuesday were pretty much exactly what they were on Monday.

I’m continuing to recommend locking all loans.   Why?

• On Thursday (tomorrow) the jobs report comes out.    The impact us not so much what the number is for jobs lost (and unemployment) but the difference between actual numbers and market expectations.   Expect volatility and more upside risk than downside potential on this.
• As I said before, this week is going to be very “thinly” traded and therefore much more susceptible to fluctuations than it normally would.
• Much of my recommendation about locking loans is about reducing risk and taking what works for you than it is about squeezing every last bit of profit potential out of the “dips” in the market.

I’ll have more on the markets as the day continues…..