Marc's Mortgage Matter's

A light economic calendar provided little reason for mortgage rates to move to any great degree last week of 2010. However, they did close the year with a slight move upward.

FHA-backed offers, so crucial to first-time homebuyers and low-equity refinancers, increased by the same amount to finish the last week of 2010 at 4.875%, while the overall average rate for 5/1 Hybrid ARMs remained below the 4% threshold with an average initial five-year rate of 3.95%

By all accounts it was a year to remember, with mortgage rates slowly falling to multi-generational lows at one point, only to reverse course as we closed the year. As is typical, mortgage rates again rose much more quickly than they fell, causing at least a few refinances to crash. Despite the increase, rates remain quite favorable, but refinancing activity will probably be considerably more subdued in 2011 than it was in 2010.

While the economy is finishing the year in a fairly firm position and holds greater promise of improvement for 2011, consumers still don't believe the hype. Measures of consumer outlooks have improved off very low bottoms but remained mired in dismal territory, and the latest reports show that any post-election euphoria has seemingly worn off.

After tying a 2010 high of minus 41 last week, the ABC News/Washington Post poll of Consumer Comfort dipped by three points during the week ending December 25. It's likely that disappointment at sharply rising prices for gasoline during the holiday traveling season were the culprit, but perhaps too few people got what they wanted for Christmas to generate any enthusiasm.

With a weaker dollar boosting exports, and a strengthening world economy more interested in them, it's little wonder that there have been some increases to be seen in production-related indicators. A purchasing managers group based in Chicago reported a large increase in their gauge of activity in December, which rang in at 68.6 for the month, a level not seen since the 1980s. While one month does not make a boom by any means, that there is continued strength in manufacturing is a good signal, since it should provide some momentum for growth as we move into early 2011. 

Distorted by seasonal adjustment issues but nonetheless welcome, the nicest surprise for the week came in the form of a huge decline in new applications for unemployment benefits. For the week ending December 25, a 2010 low of 388,000 new applications were filed at state windows. The prior week was revised upward to 422,000 filings, and a more accurate reading is probably somewhere in that range or perhaps just below it.

We'll begin 2011 with mortgage rates considerably below where we began 2010. It's true that interest rates are less favorable now, but are at pretty low levels despite the end-of-2010 run up.

Here's wishing all of you a happy, healthy and prosperous 2011.

A young man shopping in a supermarket noticed a little old lady following him around. If he stopped, she stopped. Furthermore she kept staring at him.
She finally overtook him at the checkout, and she turned to him and said, "I hope I haven't made you feel ill at ease; it's just that you look so much like my late son."
He answered, "That's okay."
"I know it's silly, but if you'd call out "Good bye, Mom" as I leave the store. It would make me feel so happy."
She then went through the checkout, and as she was on her way out of the store, the man called out, "Goodbye, Mom."
The little old lady waved, and smiled back at him.
Pleased that he had brought a little sunshine into someone's day, he went to pay for his groceries.
"That comes to $121.85," said the clerk..
"How come so much ... I only bought 5 items.."
The clerk replied, "Yeah, but your Mother said you'd be paying for her things, too."