On Monday, the Dow Jones closed below the mental barrier of 10,000 points for the first time since 2004.
Bad news… well it depends… doesn’t everything these days!? Despite the milestone of ‘doom and gloom’ there is a large group of the American public with reason to “stand up and cheer” [You gotta say that like that Las Vegas boxing announcer guy. Trust me, say it out loud and it will make you laugh.] Anyway, as stocks sold off, mortgage bonds rallied to the benefit of Orlando home buyers and mortgage rates shoppers everywhere. Remember, we talked about this being called the ‘flight to quality’? Anyone? Buehler?
Conforming mortgages rates improved on Monday. No wait, no they didn’t, wait… yeah… that’s right they did. [Isn’t this fun?] here is why you don’t need to read the rest of this… if this kind of thing makes blood shoot from your eyes… just make sure you have someone [call them…say…uh… a freak] in your corner that actually eats this stuff for breakfast. Did I mention I love writing blogs about blood shooting from people’s eyes?
Most interesting here is that rates improved for the same reason that the stocks fell. That was the LARGE SUCKING SOUND you heard. See, the worlds’ economies, yeah… they got people worried. It seems that investors have lost their collective appetite for risk for the time being. In response, they sold their stock positions and parked the proceeds in the “safe haven” of U.S. government-backed debt. [Read again – flight to quality]
Now, we can’t predict when the market’s risk appetite will return any better than predicting any insatiable carnivorous activity, but when it does, expect money to flow into stocks just as quickly as it left… ANOTHER LARGE SUCKING SOUND.
All year long, with respect to stock markets, it’s been either “everybody in” or “everybody out” and, for now, it’s everybody out. This is why mortgage rates fell Monday.
As evidenced by Tuesday’s reversal to worsening for Orlando mortgage rate shoppers, it is imperative the Orlando home searchers have their finger on the trigger so they can get the best mortgage rate and get the rate lock in place. [Was that good English?] In other words, be ready to lock that mortgage rate because as soon as the stock market reverses course, mortgage rates will head higher.
And if stocks recover as quickly as they tanked, expect mortgage rates to spike badly.
(Image courtesy: USA Today)