Mortgage rates remained just above 6.0% for the third consecutive week. Some other headlines from the week offer a hint of what’s behind the recent creep upward in those rates:

• Oil and gas prices surged to new record highs, after oil had looked like easing during the previous week
• Retail sales showed unexpected strength in April
• New jobless claims declined in the latest weekly data
• Productivity gains were surprisingly strong in the first quarter

For potential mortgage borrowers, the level of mortgage rates might be the only headline that draws attention, but the broader economic developments can provide some clue as to what to expect in the mortgage market during the weeks and months ahead.

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The past week was chock full of news affecting the mortgage and housing markets:

• Foreclosure notices were reported to have increased by 112% over the past year
• Housing prices nationally were reported to have declined by 12.7% over the past year
• Economic growth for the first quarter of 2008 remained positive, if anemic
• The Federal Reserve cut interest rates for the seventh time in as many months

In short, a clouded economic picture continues to make this a buyer’s market for financially sound house hunters.

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Mortgage rates and housing prices run on different cycles, but they are somewhat related. However, coordination between the two cycles got somewhat out of synch over the past week:

• Mortage rates broke out of their month-long holding pattern and edged upward
• New home sales declined by 13.3% for the year ending March, 2008
• Existing home sales declined by an even faster rate for the same period

From a potential home buyer’s perspective, it has been possible to sit back over the past year and watch prices steadily get cheaper. However, the tick up in mortgage rates could signal a call to action — it might be best not to wait too long before getting a mortgage.

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Mortgage news overall continued to spell opportunity for potential home buyers, but there are also signs that favorable mortgage rates might not last:

• 30-year mortgage rates posted a fifth consecutive reading between 5.85% and 5.88%
• Mortgage foreclosure rates continued to rise
• Southern California home prices reached a four-year low
• Signs are spreading that inflation is taking hold

The combination of low mortgage rates and falling home prices is great for today’s home buyers, but the inflation signals are a reminder that these conditions may not last. 

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The significant thing in mortgages this week wasn’t what had changed, but what had stayed the same. 30-year mortgage rates posted their fourth consecutive weekly reading within a range of only 0.03%. 

This stability was not because of a lack in economic news. Among the prominent developments:

• High-ranking government officials, including Treasury Secretary Henry Paulson, continue to issue increasingly more somber pronouncements about the economy
• After a brief respite, oil and gas prices once again surged to new highs
• Meanwhile Congress and the White House continued to debate over how far mortgage relief measures should go

Indeed, considering the amount of economic news, the fact that mortgage rates remained unchanged was not because there were no new developments, but more because conflicting developments essentially fought to a standstill.

For mortgage shoppers, this meant good news — additional time to think and act while mortgage rates are still at uncommonly low levels. 

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