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
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