Ok - for only those who are asking why rates have suddenly spiked up to the mid 6% range, read on. Everyone else - use the "d" key.

Rates are rising right now, but still should be lower. The reason - the treasury is selling an extroadinary amount of treasury bills in it's weekly auctions to finance that 700 billions dollar bailout package. T-Bills have an inverse price/yield relationship, so it works this way: in order to sell the t-bills, the prices are going way down (more supply than demand) which means that the yields go up. The outcome is that we are seeing rates this week in the mid 6% range and they could even hit 7% until these auctions are slowed.

That being said, all other fundamentals point to lower rates once this slug of financing is exhausted. Mortgages, in a normalized market, should sit about 1.5% above the ten year treasury. Today they are about 2.25% above so rates are in the mid 6% range instead of the high 5%'s. The reason for this is that dollars are chasing t-bills versus mortgages due to the huge auction and the prices they can be aquired at which makes mortgages less interesting to investors (especially with the risks in the us mortgage market).

Bottom line: this is a bizarre technical environment that will push rates up when really long rates should drop. We (many in the industry) believe that the treasury will realize what these moves are doing to housing and that we will see adjustments in the weeks ahead.