Mortgage Blog

Sales of existing homes unexpectedly rose by 3.9% in February, the largest monthly gain in three years, the National Association of Realtors reported March 23. The price of a median home sold last month dropped to $212,800, down by 1.3% from the same month in 2006, marking a record seven straight months that the median home price has fallen.

Construction of new homes and apartments rose 9% in February to a seasonally adjusted annual rate of 1.53 million units, the Commerce Department reported March 20. Construction had fallen by 14.3% in January. Even with the better-than-expected rebound, construction activity remained 28.5% below last year's level.

Builders' applications for new permits, considered a reliable gauge of future activity, continued falling in February, dropping by 2.5% to an annual rate of 1.53 million units. That marked the 12th decline in the past 13 months in building permits.

By Caroline Valetkevitch

NEW YORK (Reuters) - U.S. stocks rose on Wednesday, led by hard-hit financial shares as some investors' concerns about the subprime mortgage crisis eased.

A rise in oil prices led to broad gains among energy shares, sending Exxon Mobil Corp. up 1.6 percent. That helped benchmark indexes bounce back from steep midday losses of 1 percent on the Dow and S&P 500 in a session typical of the market's recent volatility.

Most notable were resurgent mortgage lenders, investment banks and home builders, the sectors hit the hardest in the previous session's sell-off, the second worst of the year.

"The mortgage lenders, home builders and related financials are getting a rebound from yesterday's carnage," said Rick Campagna, a portfolio manager with Provident Investment Council in Pasadena, California. "It's a relief rally within the ongoing correction."

The Dow Jones industrial average was up 57.44 points, or 0.48 percent, to end at 12,133.40. The Standard & Poor's 500 Index finished up 9.22 points, or 0.67 percent, at 1,387.17. The Nasdaq Composite Index ended up 21.17 points, or 0.90 percent, at 2,371.74.

This graphic from the Wall Street Journal shows last week's losses across a few of the world's major stock markets.

Money leaving stocks has to go somewhere and investors have two choices:

• Hold the money as cash
• Invest the money in bonds
   

Usually, investors don't want to be on the sidelines. So, they will often take the proceeds of a stock sale and use it to purchase bonds.

Remember that mortgage rates are the by-product of prices and yields in the mortgage-backed securities market. When demand for bonds increase, it drives up the price and drives down the yields.

This is why rapid stock sell-offs often leads to lower mortgage rates.

This past week was a little bit different, though.

Despite the worldwide losses, mortgage rates decreased only about 0.04% on average, according to Freddie Mac's weekly survey.

The benchmark 10-year Treasury note, however, dropped 0.165%. This is the biggest gain in over five months for the treasury market.

Investors chose to park their money with the U.S. government last week and that reminds us that one very important fact about the oft-confused bond markets:

U.S. treasuries and MBS tend to move in the same direction, but treasuries cannot be used as a predictor of mortgage rates, nor can they be used to price mortgage loans. Only the mortgage-backed securities market can be used to price mortgages.

As many of you may know blogs have been around for a short time and are somewhat useful to certain websites. So, I have added a new addtion to my website, a blog page.  I will update the blog with notable Mortgage, Financial and Technical information.  I will also add local events.

Enjoy!