Mortgage Market Commentary from Mark Cohen at Cohen Financial
Beverly Hills Real Estate – www.ChristopheChoo.com
The biggest influence on mortgage rates last week came from outside the US. Concerns about the possible default of sovereign debt in several smaller nations caused investors to seek the relative safety of US fixed income securities. Last week’s economic data was roughly balanced in terms of positive and negative surprises. The added demand for safer investments helped mortgage rates move lower during the week.
The recession has impacted countries in different ways. Some of the hardest hit have been smaller European nations, such as Greece and Spain. As members of the European Union, they must adhere to certain restrictions that limit their flexibility to adjust domestic economic policy. As a result, some countries may be at risk of defaulting on government debt. Investors responded by buying relatively safer assets such as US bonds, including agency mortgage-backed securities (MBS). Investors also withdrew money from global stock markets during the week. In the US, the Dow fell about 200 points.
Last Friday’s important Employment report contained mixed news. Against a consensus forecast for a gain of 15,000 jobs in January, the economy lost 20,000 jobs. The big story, though, was an unexpected drop in the Unemployment Rate—to 9.7%, down from 10.0% in December. Two separate sources of data are used to compute the change in jobs and the change in the unemployment rate, and during volatile periods the two methods can show widely divergent results. Many economists, pointing to an improving labor market, viewed the decline in the unemployment rate in January as very good news. On a more negative note, however, revisions to older data showed that the economy has lost more jobs since the start of the recession in December 2007 than previously thought. This figure was revised upward to 8.4 million jobs from the previous reported level of 7.2 million jobs.
