Rates went lower last week

The 30 year fixed rate dropped last week to a national average of 6.56%, down .06 basis points from the previous week. This is the lowest since late March when rate were beginning their march upward. 5/1 Hybrid ARMs also felt the down trend with an average of 6.30%.

Sales of both new and existing homes continue to decline, as the combination of prices and interest rates continue to dampen affordability at a time of slowing economic growth. The headlines for home sales predicted doom and gloom for all as a result of a housing correction. This may not be as bad as the papers want us to believe. 6 million homes sold per year is a peak that is very hard to sustain year after year. There may be some buying opportunities in the near term as the seller's market cools, and mortgage rates level at these historical lows.

If rates stay at the current levels, perhaps trending downward slightly, the hype about the pay option ARMs may not pan out as these homeowners may be able to refinance their Treasury indexed adjustable mortgages into fixed rate mortgages at similar rates to their fully adjusted ARMs. This will keep their payments at the same level, without increase as the markets fluctuate.

An economic soft landing is not a foregone conclusion, however. It will take an extended period of subpar growth to keep rates low, and housing is only one component of the economy (the financial industry head hunters that I know are having terrific years as Wall Street hires seem to be up). The economy numbers don't seem to be bringing any good news, though unemployment remained steady at about 330,000 claims last week. The Chicago Federal Reserve index of national economic activity pointed to below trend growth for July. The Fed's Richmond district also saw slowing.

It is summer with it's typical market slowdown and we are heading into a 3 day weekend, so the markets aren't expected to do much. September will bring more indications of where we are headed as everyone comes back to work from vacation and other summer distractions.