I want to start off this week's newsletter with the positive news and events that exist so I can build momentum when we move into the discussion of the negative news. (Remember, I am just the messenger)
Positive News for the week:
• First time jobless claims dropped 31,000 from the prior week. The 473,000 first time claims is still high however we will gladly accept any improvement.
• Mortgage rates are still incredibly low with the national average of a 30 year fixed mortgage at 4.55%
• Durable goods orders increased by .3%. There is still broad based weakness in manufacturing however the increase from last month is an improvement from the prior declines we have been experiencing.
• GDP grew at a rate of 1.6% for the 2nd quarter which, although down from the first quarter, it still is showing that country is experiencing at least some type of economic growth.
Negative News for the Week: (Buckle up for this)
• Existing home sales dropped 27.2% from the prior month and they are down 25.2% from a year ago.
• New home sales dropped 12.4% from a month ago. The median home price dropped .6% to $204,000 which is the lowest point since 2003. (Normally I would say that the drop in the median price would increase home affordability. However with the never ending tightening of lending guidelines, home affordability is not increasing because a borrower's ability to qualify is decreasing at a faster pace)
• Mortgage applications rose .6% with refinances leading the way. The good news in this report is that consumers are applying for mortgages however the purchase market remains virtually stifled. 82% of mortgage applications taken were for refinances which is a clear indicator that people are not jumping into the housing purchase market.
• The stock market took a beating this week. As of the time of this report the DOW is sitting below the 10,000 mark and the talk of double dip recession is heating more and more each day.
Commentary:
Although the majority of the news over the past few weeks has been primarily negative, my fears about the future have gone away. The reason I say this is because time and time again we have demonstrated as a country, what first is uncomfortable and abnormal, we eventually learn to accept as reality.
We have been in this recession for quite some time and we are starting to accept the fact that we are not coming out of this anytime soon. This is our reality for the foreseeable future and we need to accept it and plan accordingly. The world is not coming to an end, it is just a different world and we as a country are adapting to it. We will continue to thrive and prosper we just have expect that it will take longer. There is money and opportunity whenever there are challenges and adversity. It is up to you to take advantage of what is happening.
Next week is going to be a busy news week with many market impacting reports:
• Tuesday August 31st - S&P Case-Shiller Home Value Index & Consumer Confidence
• Wednesday September 1st - MBA Applications, ISM Manufacturing Index, Construction Spending
• Thursday September 2nd - Weekly Jobless Claims and Pending Home Sales
• Friday September 3rd - Employment Situation
Your Mortgage Consultant,
JJ Mack
916-517-1800
Sunday, August 29, 2010
Friday, August 20, 2010
Mortgage Weekend Update - 08/20/2010
Unfortunately the only real positive news being reported these days is that corporate profits overall are up across the U.S. Because of all of the cost cutting measures that big corporations have been taking for the last 2 to 3 years, companies have been able to increase returns for stockholders and increase profits.
Outside of corporate profits, I am sorry to say that the majority of economic news is not where we would like to see it. The first half of the week we saw the stock market rising nicely based upon corporate profits and the fact that many of these same companies have been able to sock away lots of cash for a rainy day. Overall sales have not been increasing which is the driving force to a recovery however investors are focused on profits more than on sales right now.
Thursday the stock market did an about face dropping 144 points as weekly first time jobless claims were reported much higher than expected. The 500,000 claims reported are the highest we have seen since November of 2009. Additionally, the 4 week moving average, which has been rising as well, hit the highest number since December.
Companies, especially in the private sector, are not hiring as fear of a faltering recovery is taking hold. More and more people are believing that once again the economy is heading in the wrong direction and that recovery is much further away than originally anticipated.
The housing market has not been fairing much better these days. The Housing Market Index reported a 3rd monthly decline as builders see tight credit, lousy appraisals and distressed properties as a hindrance to selling new construction.
On a positive note, Housing Starts increased 1.7 in July which was a nice respite from June's 8.7% decline. Multifamily construction was the key to leading the index higher. Single family construction continues to struggle as that part of the index declined by 4.2%.
Fortunately mortgage rates continue to remain at record lows. The Mortgage Bankers Association reported that applications for mortgage are rising. Refinancing is the driving force in the application increase. Refinances currently represent 81% of all applications. Applications for home purchases continue to falter as they dropped 3.4% from the prior week despite the record low interest rates. The bottom line is that with the unemployment picture remaining very unstable, consumers are afraid to make a commitment to purchasing a new home.
Industrial Production increased 1%, which was higher than expected, showing that there is at least some positive activity in the manufacturing sector. Additionally, the Producer Price Index increased .2% which was in line with expectations. The PPI was driven higher primarily by an increase in food prices on the wholesale level. However, last week's report on CPI showed that the increases in prices on the wholesale lever are not being passed on to consumers.
Economic reports due out next week are:
• Tuesday August 24th - Existing Home Sales
• Wednesday August 25th - MBA Applications
• Thursday August 26th - Weekly Jobless Claims
• Friday August 27th - Consumer Sentiment and GDP
Your Mortgage Consultant,
JJ Mack
916-517-1800
Outside of corporate profits, I am sorry to say that the majority of economic news is not where we would like to see it. The first half of the week we saw the stock market rising nicely based upon corporate profits and the fact that many of these same companies have been able to sock away lots of cash for a rainy day. Overall sales have not been increasing which is the driving force to a recovery however investors are focused on profits more than on sales right now.
Thursday the stock market did an about face dropping 144 points as weekly first time jobless claims were reported much higher than expected. The 500,000 claims reported are the highest we have seen since November of 2009. Additionally, the 4 week moving average, which has been rising as well, hit the highest number since December.
Companies, especially in the private sector, are not hiring as fear of a faltering recovery is taking hold. More and more people are believing that once again the economy is heading in the wrong direction and that recovery is much further away than originally anticipated.
The housing market has not been fairing much better these days. The Housing Market Index reported a 3rd monthly decline as builders see tight credit, lousy appraisals and distressed properties as a hindrance to selling new construction.
On a positive note, Housing Starts increased 1.7 in July which was a nice respite from June's 8.7% decline. Multifamily construction was the key to leading the index higher. Single family construction continues to struggle as that part of the index declined by 4.2%.
Fortunately mortgage rates continue to remain at record lows. The Mortgage Bankers Association reported that applications for mortgage are rising. Refinancing is the driving force in the application increase. Refinances currently represent 81% of all applications. Applications for home purchases continue to falter as they dropped 3.4% from the prior week despite the record low interest rates. The bottom line is that with the unemployment picture remaining very unstable, consumers are afraid to make a commitment to purchasing a new home.
Industrial Production increased 1%, which was higher than expected, showing that there is at least some positive activity in the manufacturing sector. Additionally, the Producer Price Index increased .2% which was in line with expectations. The PPI was driven higher primarily by an increase in food prices on the wholesale level. However, last week's report on CPI showed that the increases in prices on the wholesale lever are not being passed on to consumers.
Economic reports due out next week are:
• Tuesday August 24th - Existing Home Sales
• Wednesday August 25th - MBA Applications
• Thursday August 26th - Weekly Jobless Claims
• Friday August 27th - Consumer Sentiment and GDP
Your Mortgage Consultant,
JJ Mack
916-517-1800
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