Despite a sputtering but solid rally in the stock markets, we’ve enjoyed some surprisingly low interest rates in the mortgage market.  Usually, when stocks are on the way up, investors will cash out their bonds and buy in.  Since mortgage interest rates are dictated by the investment community’s appetite for bonds, what is good for stocks is usually bad for mortgage rates.

Why is right now the exception to the rule?  Because Uncle Sam is printing money like crazy and us­ing that money to buy mortgage bonds.  I believe some call this technique “robbing Peter to pay Paul.”

For the short term, this means that you and I have access to rates lower than the market can really sup­port on it’s own.  The government is assuming that by keeping rates super-low, they will encourage people to buy homes rather than rent, which will hopefully repair our country’s housing crisis and, ultimately, our economy.

That’s the optimistic assumption we’re working with, at least.  A good old fashioned glass-is-half-full outlook.

For the long term, all that money floating around will result in one of two things: inflation or sky-high rates and taxes.  Basically, if you own a store and you think your customers just got some more money, you’re going to jack up your prices to get your piece of that bigger pie.  So, Uncle Sam will increase key interest rates and try to suck money out of us to prevent consumer overspending.

Regardless, the bleaker the economic news, the more Uncle Sam will come riding to the rescue and say that he’s going to throw taxpayer money at keeping mortgage rates low.  Today, we saw the Fed­eral Reserve come out with a very gloomy outlook on the rest of 2009 and rates instantly dropped.

So, while you may not have a job by the end of the year, it’s crazy cheap to buy a house.

The fact is, this is a situation that we can’t keep up for long.  Eventually, the treasury will run out of money aimed at keeping rates low and these mortgages in the high 4’s and low 5’s will become a thing of the past.  It’s not a matter of if; it’s a matter of when.

In other news, California has evidently abandoned their ‘legalize marijuana and tax it to cover our gap­ing budget hole’ agenda and has opted instead to let the constituency decide for itself.  So, everyone voted between massive budget cuts or tax hikes and deficit increases.  That’s fairly similar to deciding between being blinded or being shot in the kneecaps.  Not thrillingly fun either way you go.

And, of course, California decided simply to increase their budget deficits and deal with the problems later in life.  Procrastination.  Awesome.  Maybe Mr. Schwarzenegger should just crank out a few more action flicks to pay for their debts.  Seemed to work for Sylvester Stallone in the new Rambo.