CR Links for the day

Two good posts from CalculatedRisk this morning.

First: The Fed's Mortgage Backed Securities (MBS) purchase program is now 99.84% complete. Only $2 Billion (only!) remain to be spent on MBS of the original $1.25 Trillion that was printed for their purchase.

Remember, the reason this program exists is to drop the interest rate on mortgages. Low interest rates mean borrowers can bid higher prices for a house while keeping the same monthly payment. The end result is that home prices drop less. This was a very creative way for the Fed to put a floor under falling home prices.

Now that the program is over, mortgage interest rates will increase. The question is: how much will they rise? CR has consistently predicted a 0.35 to 0.5% increase (that is, from 5.0% to 5.35% or 5.5%).

Interestingly enough, mortgage demand is very low and has been since October. Low demand for mortgages is also helping to keep mortgage rates down. It also means that the government's other housing program, the first time home buyer's tax credit, has pulled forward as much demand as it can. There is no future demand to borrow. The anemic sales reported for January and February, while this program is still active, suggest* that when the program ends, there will be hardly any sales volume at all. Future demand has been tapped; it's dry. When we get to the future, there will be little demand waiting.

*(to me, CR has not made this assessment)

Second. February unemployment by state has been released. North Carolina is at a new historic high at 11.2%. That put's North Carolina as having the 10th worst unemployment currently. Again, bad news for a housing "recovery" if people out there are still holding their breaths for one.