After a several week surge upwards, mortgage rates finally took a breather this week as the average 30 year fixed mortgage dropped to 5.38% down from 5.59% according to Freddie Mac.  Some 30 year fixed rates were being quoted as high as 6% a couple of weeks ago, whereas a couple of months ago those same home loans were going for near 4.5%.

15 year fixed mortgage rates dropped to 4.89%, and five year adjustable rate mortgages dropped to 4.97%.  All good signs for the housing market and the economy overall!

Mortgage rates have been volatile, and it’s highly important if you’re shopping for a mortgage that you compare home loan quotes online early and often to make sure you get the best rate for your situation!

According to the U.S. Bureau of Labor Statistics the unemployment has now reached a staggering 9.1%.  While there has been SOME slowing in the number of jobs lost, unemployment remains high hampering efforts at an economic recovery.

But just how does that stack up to the Great Depression?  In the early stages of the Great Depression, unemployment hit nearly 16% in 1931.  Towards the middle of the Great Depression in 1934, unemployment peaked at nearly 25%.

Are we on our way to another Great Depression?  The current economic collapse started in late 2007, nearly two years ago.  The Great Depression started in 1929 and lasted roughly the entire decade of the 1930′s.  I wouldn’t dare to guess if we’re in for something similar in nature, as it’s impossible to predict future events.  But if unemployment is a measure you can look at it two ways, 1) this isn’t nearly as bad as the Great Depression (glass half full) or 2) things can get a WHOLE lot worse (glass half empty).

I choose to be a glass half full kind of thinker…

The National Association of Realtors last week said that pending home sales rose 6.7% in the month of April.  This represents the third month in a row that home sales are looking brighter and brighter, and that the recession may be slowing to some extent.  The report also showed that year over year pending home sales have increased by a larger than expected number.

More contracts in process means more home sales a month or two from now!  More home sales means the flood of inventory will start to contract to some extent.

Unfortunately, after plummeting to the mid 4% range, the 30 year mortgage rate has jumped substantially in the last month.  The massive amounts of government debt are piling up, and the United States credit status is now being called into question.

China has been buying our treasuries, effectively loaning the United States money to float our substantial economic recovery programs and budget deficits. However now with the credit status of the United States being called into question it remains to be seen whether or not the Chinese will continue to “float us”.  If they stop buying our bonds, interest rates on those bonds will have to move higher to attract investors.  Unfortunately this will correspond with higher mortgage rates and could squash our hopes of a near term economic recovery.