It appears the steady climb to higher interest rates is waning. We have recently moved through the 200 day moving average for Mortgage Backed Securities. The FNMA 4.00% Coupon stands at 99.72 improving 22 basis points today. The 10 year bond market has continued its rally and stands at 3.25 today as well. Remember that an increase in demand for bonds (lower economic forecasts) translates to lower long term interest rates.  This recent movement has occurred in the past 30-45 days and appears to coincide with the lowering of growth estimates. Let’s face it, much of the growth in the past year or so has to do directly with government stimulus spending. With the technical explanations out of the way let’s look at what it all means.

With interest rates still at all time lows and our local region faring better economically than the nation as a whole has created opportunity. As I have recently posted, there continues to be better employment opportunities in Seattle (see Spring Break Fun and Local News).  Keeping in mind that we have seen a substantial decrease in values since the credit crisis took hold it looks to this Troll that we have the makings of a recovery. If rates are down and rents are up (see Rents on the Rise?) people will start to choose home ownership and its tax benefits rather than staying put and paying someone else’s mortgage.  We are seeing now that houses that are appropriately priced in solid neighborhoods are garnering multiple offers. These conditions should collectively foster additional demand for entry level housing, which of course is our Specialty! For more information feel free to give me a call.

The Troll