On the surface, 2008 seemed to end with more of the same — relentless bad news on the economic front:

• Newly-released data on home prices revealed that the year-over-year decline had reached record proportions
• Unemployment data showed more continuing claims for benefits than at any time since 1982
• The consumer confidence index reached its lowest level ever (the index began in 1967)

It looked like a week only the Grinch could love. But were there perhaps some signs of hope just below the surface? 

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The week leading up to Christmas was relatively free of dramatic developments. With the government having exhausted many of the options at its disposal, there was just a steady drumbeat of continued negative economic news. Meanwhile, mortgage rates slipped down a little further, exploring new record-low territory. Those lower rates take on greater significance with the slide in housing prices looking like it may actually be bottoming out in some areas.

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Late yesterday (Tuesday) afternoon, the Federal Reserve slashed its target for the overnight federal funds rate to a range of 0 to 0.25 percent. That may sound like meaningless gobbledygook, but it’s not. It’s an all-time record low. Read the rest of this entry »

CNN is trailing yet another doom-and-gloom report. This one, which will be out later today, predicts that we’re less than three weeks away from yet another miserably depressing milestone. Read the rest of this entry »

It may only have confirmed what most people already suspected, but the biggest financial news of the week was the official announcement that the United States was already in a recession.

Two very different consequences of the slumping economy could be seen in other news of the week:

• Unemployment figures reached levels last seen in December of 1982 — when the economy was just starting to recover from a one-two punch of two recessions in three years
• Mortgage rates plummeted, approaching their all-time lows

While the prospect of unemployment may be enough to give anybody pause, those low mortgage rates should be a green light for many borrowers.

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To much fanfare, the Federal Reserve cut interest rates on October 29th. That was supposed to be this week’s Halloween treat for the markets. The trick came the next day, when Freddie Mac’s survey of mortgage rates revealed that 30-year rates had risen sharply for the week. 

So what gives? A clue to why market rates moved contrary to the federal funds rate could be found in two other pieces of news:

• The housing market continued to be weak, as one survey of major housing markets saw prices extent their slide to 25 consecutive months
• The U.S. dollar showed signs of weakness which were exacerbated by the cut in federal funds rates.

For the time being then, despite the Fed’s actions, things got tougher for borrowers rather than easier. This highlights some realities of what the Fed can and cannot do.

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There’s an old saying that it’s an ill wind that blows nobody any good. It applied this week, as the whirlwinds on Wall Street had an unexpected benefit for mortgage shoppers.

• Insurance giant AIG became the latest addition to the string of financial failures, the taxpayer cost of which is rapidly rising
• Leading economic indicators declined by more than expected in August
• Along with a slowing economy, inflation also backed off rapidly in August
• Lower inflation gave interest rates room to fall, so mortgage rates took another impressive step downward over the past week

While mortgage shoppers should not ignore the gathering economic and financial clouds, those lower mortgage rates should remain their primary focus.

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It was enough to make any mortgage observer recall the old joke about the light at the end of the tunnel turning out to be a train. A steady drip of positive news lately was overshadowed by the news that lender GMAC Financial Services was closing 200 retail offices and laying off 5,000 employees. The move was designed to scale back the firm’s mortgage lending presence in reaction to losses in that sector.

Still, while this story grabbed the headlines, home buyers and mortgage shoppers should not lose sight of some of the more positive news:

• Mortgage rates have settled into a gentle, downward trend
• Lower oil prices are taking some of the heat off of inflation, and thus interest rates
• Mortgage application volume showed signs of life

While the GMAC story was a reminder of why economic recoveries can take so long to develop, the underlying fundamentals suggest that conditions may be getting better for the housing market.

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An unexpectedly strong revision of second quarter gross domestic product (GDP) stood out amid an otherwise mixed bag of economic news of interest to home and mortgage shoppers.

In fact, this strong GDP number should be something of a wake-up call, or a call-to-action, for anyone who has been putting off buying a house. It may not pay to delay any further before starting to look for a house and compare mortgage companies.

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Mortgage news was dominated by two items this week:

• President George W. Bush signed the mortgage relief bill, designed to help troubled home owners stave off foreclosure
• A prominent home price index reported a 15.8% decline for the year ending May 31, 2008, the biggest year-over-year decline so far

On the surface, the first would seem to be a highlight, and the second a lowlight, of the week’s mortgage and housing news. Reading between the lines, though, reveals that the first item may not be as good as it’s been reported, but the second item may not be as bad.

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