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Mortgage rates keep dropping, but they're dropping ever so slowly. Homeowners with loans in-process can stop worrying about having locked "too soon" -- rates are essentially the same today as they've been for 2 months. And for everyone else, it means there's still more time to join the Refi Boom.
In currency markets, the U.S. dollar has been getting slaughtered. It's at a 2-month low against the Euro and is similarly weak against Asian currencies. But demand for dollar-denominated bonds is offsetting the expected rise in mortgage rates.
The Federal Reserve's Agency MBS Program introduces massive amounts of demand for mortgage-backed bonds over a short period of time, creating a buy-side imbalance that leads bond prices higher and bond yields lower. It's possible the Fed could expand the program, bringing mortgage rates down to the 4-percent range once again.
Even as homebuilders predict pain in 2009 and carry confidence readings in the single-digits, they still expect a rosy 2010, it seems. With current new home inventory at 11-plus months, this is a strange way of thinking. Especially as the growing number of foreclosures dilutes home supply in the nation's largest markets.
