"IF A WINDOW OF OPPORTUNITY APPEARS, DON'T PULL DOWN THE SHADE." Tom Peters.

Thank you Trish Morrison for the interesting articles you sent.  Below are some of the points from her latest newsletter:

Good news last week, as Housing Starts for February came in better than expected and actually increased for the first time in eight months. In addition, Fed Chairman Bernanke stated the recession should end in 2009 and that he is confident of the long-term outlook for the US economy.

Last week, the Fed saw their regularly scheduled meeting as a window of opportunity to make a blockbuster announcement.  As mentioned earlier, on Wednesday the Fed announced that over the course of 2009, they will purchase an additional $750 Billion of Mortgage Backed Securities, as well as $300 Billion in long-term Treasuries, primarily to help shore up the housing market and keep home loan rates low. On the announcement, Bonds exploded higher, leaving Bond prices within whiskers of the best levels ever. 

However, it’s important to understand that while their actions may keep a lid on rates moving higher, they may not cause them to move dramatically lower… more on this in the Mortgage Market View article below. 

 

Additionally, due to many understaffed lenders and investors currently working at maximum capacity, we could once again see that improvements in Bond pricing may not all be passed through to our rate sheets. 

Another factor that could impact whether Bonds and rates see significant improvement ahead are concerns of future inflation – the arch enemy of Bonds and home loan rates – brought on by all the recent aggressive moves by the Fed. While we know there is little inflation at the present time, the chatter of future inflation could have a negative impact on Bonds and home loan rates, or at least stifle any improvements. 

 

Although the media is already spinning it differently, this is not a time to stay on the fence, hoping and waiting for lower rates. Home loan rates remain within inches of all-time historic lows, but may not necessarily move significantly lower based on this purchasing plan – waiting is a very risky move.