Market Comment
Mortgage bond prices rose last week, pushing mortgage interest rates lower. The Fed spent another $45 billion buying mortgage bonds between November 5th and the 11th. For all the criticism the Fed receives for the handling of the economy, they deserve credit for keeping mortgage interest rates low throughout the year. However, the long term outcome is uncertain. The record Treasury auctions continued to be absorbed in trading without any major problems.

For the week, interest rates improved by about 7/8ths of a discount point.

This Wednesday’s consumer price index data will be the most important release this week. Producer price index data along with retail sales data will set the tone for the start of the week. While inflation indications could hurt mortgage interest rates, signs of tame inflation could help rates improve.

Tax Credit Extension
The housing market received some good news when Congress recently acted on the pleas of housing sector professionals and extended the $8000 first time home buyer tax credit. In addition, the program was expanded to include move-up buyers with a $6500 tax credit. The program now runs through April of next year. Prior to the extension the program was set to eclipse at the end of November. Additional details about the extension can be found here.

Even with the positive measure, the program is criticized for doing nothing to address the foreclosure problems that continue to plague the housing market. Unfortunately, the cost to extend the credit is around $1 billion per month. This has politicians from both sides of the aisle concerned.

The new and move-up buyer incentives coupled with historically low interest rates make now a great time to purchase a home. Low rates also make it favorable for many current homeowners to refinance.

Related Articles: First Time Homebuyer, refinancing, The Fed