Mortgage rates edged lower this week, as the prevailing drift of housing news could be seen as good or bad, depending on the perspective.

• Home prices in the first quarter of 2008 were reported to have fallen by 7.7% from the same period a year ago
• Foreclosures for the month of April were reported to be up 65% from one year earlier
• Inflation for April came in at a relatively mild 0.2% 

In other words, more bad news for homeowners — at least some of them — but good news for potential home buyers.

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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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This week, Forbes Financial Columnist, Ken Fisher, published an article alleging that we’re all being a bit too gloomy about America’s economic prospects for 2008. In this article, titles, We’re Too Gloomy, he reminds us how connected the US economy is with world markets. “Since the foreign economy is twice America’s size, and is strong, America should do well in 2008 — better, at any rate, than people expect,” says Fisher.

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