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More bad economic news could help keep mortgage rates low

January 13, 2011

There were as a double whammy this week regarding the state of the economy that may give pause to investors as to the extent of the recovery. 

 To begin with, RealtyTrac reported today that foreclosures in 2010 hit a record high level.  To make matters worse, the number would have been greater had there not been a robo-signing catastrophe, which artificially kept the foreclosure rate lower.  Predictions are that 2011 will likely be worse and may represent the peak of foreclosures for the US housing market.  On a somewhat bright note, the majority of the foreclosure activity occurred in states that have hitherto had the worst issues, namely California, Nevada, Florida, Michigan and Arizona.  Additionally, in the monthly moving average December did represent a drop from previous months. 

The other indicator of a possible stall in the recovery engine was in the area of unemployment.  Last week saw an unexpected rise in first time filings for unemployment.  Some of this could be due to typical seasonality as holiday workers lose their positions, however, is still does not bode well for an already fragile job market.  Since the ability to pay a mortgage is incumbant upon having a job, this could also provide a ripple effect into housing.

Mortgage pricing for Fannie Mae and Freddie Mac loans opened generall better this morning as the equities markets negatively absorbed this information.

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