PS – Don’t forget that the correlation between the Fed Funds Rate and 30 year conventional fixed rate mortgages is not as crucial as the 10 year treasury. As it has been noted many times, an inversion in the yield curves (I believe 6 out of 7 times) foretells an incoming recession. So then the recession hits, the fed lowers the Fed Funds rate and the curves are not inverted anymore.
The bond market rally is really puzzling to me. It “could” be an indicator that people are thinking the overnight rate “has” to get beaten down by the incoming recession. I really have no clue.
If housing doesn’t continue to depreciate over the next 2 years I have a wife who will skin me alive. As long as the monthly sales continue to decline I will be happy. As I said a few weeks ago, I have seen increased activity across many of the sectors for resale homes in several zips. The active/pending ratios have changed improved. Not alot but better then the middle of summer. This could be due to many reasons like people repricing aggressively, many actives simply dropping out of the market, etc… I expect inventory numbers to be down. I also expect September sales to blip up a little from August numbers but down from Sept of 05…
So my short answer is that as long as the 10 year stays above 4.5 then that will not stimulate a strong resurgence.
