Commentary: The mortgage market dodged a bullet yesterday as global investors resisted the temptation to dump Treasury debt obligations after credit ratings agencies Standard & Poor's and Moody's warned Washington it could lose it's top-notch credit standing if the government doesn't get it's financial house in order by 2013. A failure by Uncle Sam to meet the criteria to maintain at least an Aaa credit rating will undoubtedly result in higher interest rates for everything from car loans to mortgages.
As you might imagine, mortgage investors will be keenly attuned to the upcoming Congressional budget battle. The pressure is on both the Administration and on Congress to make hard financial choices. Tangible action with respect to the reduction of deficit spending will be supportive of steady to perhaps fractionally lower mortgage interest rates. On the other hand, should Congress devolve into partisan bickering and political brinkmanship -- the prospect for steady to lower mortgage interest rates will dim rapidly.
The immediate threat to a heavy sell-off in the credit markets has passed - but only temporarily. It would be a mistake to count on credit market participants to take such a passive attitude in the future if real signs of fiscal reform by the United States government are not forthcoming soon.
Earlier this morning the Commerce Department reported residential construction activity regained some lost ground in March. Housing starts rebounded by 7.2% while building permits, an indicator of the pace of future housing construction, rose 11.2%. The outsized surge in the building permits number was largely attributable to a notable increase in plans for future multi-family construction. Both measures of housing activity remain near historical lows.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
