Keeping you updated
on the market!
For the week of
November 17, 2008
|
MARKET RECAP If you were to weigh the balance of last week's economic news, the scales would tip negatively, but not overly so. Stress in the real estate market caused U.S. home sales to fall sharply between September and October, according to a national survey of more than 2,500 real estate agents conducted by Campbell Communications and reported at Housingwire.com. Survey results showed that buy-side respondents indicated a 19% drop in completed transactions through September. Falling home prices and the increasing share of deep-discount foreclosure sales drove the average purchase loan size to $219,000, down from $245,000 at the beginning of 2008. Of course, the data is...dated. The Mortgage Bankers Association reported that its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended November 7 increased 11.9% to 425.0, up from the previous week when the reading hit its lowest since December 2000. The increase in home loan demand indicates some sign of market stabilization. We could see a continued uptrend in purchase activity if mortgage rates remain stable. On that front, the trend is working to the market's favor. Last week, the prime 30-year fixed-rate mortgage slipped five basis points to 6.39% while the prime 15-year mortgage dropped 13 basis points to 6.08%, according to Bankrate's latest national survey. If there is a silver lining to an economic slowdown it is that mortgage rates tend to drop. The good news is that consumers are feeling a bit more chipper than most pundits at expected. The Consumer Sentiment Index, compiled by the University of Michigan, shows sentiment improved in early November after dropping in October. Lower fuel prices played an important role in the improved outlook. Gas prices have declined 17% since late October. In many parts of the country, gas can be purchased for less than $2 a gallon. The fact, often glossed over by mainstream media outlets, is that affordability is returning to the retail, housing and mortgage markets – and that's a good thing. |
|
Economic Indicator |
Release Date and Time |
Consensus Estimate |
Analysis |
|
Industrial Production |
Mon. Nov 17, |
0.4% (Decrease) |
Moderately Important. The expected decrease mirrors the overall economy. |
|
Producer Price Index |
Tues. Nov 18, |
All Goods: 1.2% (Decrease) |
Very Important. Further decreases in the PPI will quell any inflationary pressures. |
|
Housing Market Index |
Tues. Nov 18, |
15 Index |
Important. The index is unlikely to show any improvement until 2009. |
|
Mortgage Applications |
Wed. Nov 19, |
No Estimate Made |
Important. Applications continue to ebb and flow with mortgage-rate volatility. |
|
Consumer Price Index |
Wed. Nov 19, |
All Goods: 0.5% (Decrease) |
Very Important. Lower consumer prices give the Fed more room to lower interest rates. |
|
Housing Starts |
Wed. Nov 19, |
800,000 (Annualized) |
Important. Lower prices are stimulating interest in the new-home market. |
|
Federal Reserve FOMC Minutes |
Wed. Nov 19, |
No Estimate Made | Important. The minutes will likely reflect a recessionary bias. |
|
Leading Indicators |
Thurs. Nov 20, |
0.5% (Decrease) |
Moderately Important. Indicators will confirm current economic trends. |
|
Negativity Sells...Unfortunately The Treasury Department announced that it had scrapped plans to buy mortgage assets. Instead, the $700-billion Troubled Asset Relief Program (TARP) would continue to focus on direct capital injections to struggling banks and consider ways to help the "nonbank" financial sector. The media interpreted the strategy change negatively, hinting that Treasury Secretary Hank Paulson lacks direction and leadership. That's not the case. Many financial experts believe the best strategy to get lenders lending is with direct capital injections that improve their equity accounts. What's more, the variability in the value of many of these mortgage assets is so great in this market that arriving at a fair price is nearly impossible, so a switch to direct-capital injection is perfectly sensible. The same negative spin is often put on the mortgage market. Contrary to what you have read or heard, there is plenty of money available for home purchases, new home construction, and refinancing. While it is clear that guidelines for approvals have changed, becoming more restrictive due to the increases in mortgage delinquencies and foreclosures, loans are still available with zero down in some cases, borrower credit that is less than perfect, and down-payment assistance. Unfortunately, too many potential home buyers are heeding the headlines, and not even applying for a mortgage for fear of being rejected. We can't repeat enough that this is one of the most favorable home-buyers markets in years, and that there is plenty of money available. It would be a shame for any potential buyer to miss an important opportunity due to misinformation. |
