Why do I believe that home loan mortgage rates will continue to decline through the end of the year?  The reasons are twofold. 

I will start first off with the stock market.  As stated in a previous blog last year when the market was hitting all time highs, I predicted a 15% correction. This has come to pass.  I believe the market will continue its fall, well into next year  The market will take another 10-15% (1000-2500 points) hit by the end of the year.  There are many reasons why.  First of all, the market hasn't factored in all of the affects caused by the real estate market crash.  Earnings from corporations are down in the order of 10-15% last quarter and they will continue this fall.  Foreclosures are continuing to make record highs.  I believe the 10-15% decrease on the Dow is conservative.  We will definitely see a test of the 10000 level.  This is based on level of support in the Dow Jones Industrial Average Chart.  If the Dow cannot hold that level, it is Katie bar the doors, because the Dow will then go in a free fall to test the 7000 level, the next level of support.  Short the Dow, plain and simple, you will make tons of money.  How does this affect mortgage rates?  The smart money will have to go into the safety and security of bonds and I believe FNMA bonds will benefit.

The second reason is the government will get its act together in the way in it relates to Fannie Mae.  There is no way that the government will let Fannie Mae collapse.  The governments intervention with Fannie Mae will lend it credibility and support.  This will help restore confidence in Fannie Mae bonds.   Oh by the way, oil will continue its fall to find support near the $70 level.  However that discussion is for another blog.