With oil prices continuing to decline and gas prices projected to fall back toward $3.30 per gallon over the next couple of months, optimism is starting to creep back into the markets.

Mortgage Bonds are trading higher this morning while Treasury yields are moving lower, both positive signs for interest rates. At the same time, stocks continue to rally as investors grow more comfortable with the outlook for inflation and economic growth.

One event to watch closely today is the 20-Year Treasury auction at 1:00 PM ET. The level of demand will give us another clue as to how investors are feeling about inflation, government debt, and the direction of interest rates. Strong demand would be favorable for bonds, while weak demand could put pressure on yields.

For now, we are continuing to float our clients this week, but we are staying vigilant. Markets can change quickly, and we’re monitoring developments closely.

The housing market continues to face a simple challenge: supply and demand.

Demand for homes remains strong, but housing starts have been declining. Fewer homes being built means fewer homes available in the future, which continues to support home values despite higher mortgage rates.

At the end of the day, real estate fundamentals haven’t changed. When demand exceeds supply, prices tend to remain firm.

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