What A Difference A Point Makes

Last week was a roller coaster ride. Over 20,000 lost their jobs. Retailers complained of the worst pre-Christmas sales in 30 years. And the stock market, which has lost almost half its value since the DOW’s 14,000 high earlier this year, continued to punish investors with sickening lurches. 

But there was a bright spot – mortgage rates.

Frank Nothaft, Freddie Mac vice president and chief economist opined, "This week's decline was the largest since the week of November 27, 1981, and 30-year fixed-rate mortgage rates are now almost a full percentage point lower since the last week in October, 2008."

A point???!!!???? That’s HUGE!

Not surprisingly, the Mortgage Bankers Association announced that mortgage applications the previous week were up a seasonally adjusted 112.1 percent, as rates started their descent in earnest.

So here’s a prediction. It won’t make much difference. Applications won’t keep hitting records for the week ending December 3, 2008 and this week, because of the terrifying news that over half a million jobs were cut in November bringing unemployment to over 6.7 percent.

As long as layoffs loom larger than bargains, the stores are going to remain empty and houses aren’t going to sell, unless….buyers believe, as they did following the attacks of 9/11, that buying a home is the best place to put their money.