Have you ever been in a place in your life where you feel like you are taking two steps forward, and then two steps back? That is where the economy is right now. There is no other way to explain it.
It seems that every week the economic data points to us going nowhere fast. We get some positive news, and then negative news. For the most part, the news reports and data just continue to reinforce that the economy is very weak and that we are just chugging along ever so slowly with no real direction.
Day to day the stock and bond markets will react to economic data simply because traders and investors look to make a quick buck on the fluctuations in the markets. However if you plot the last 3 months, 6 months, even the whole year of economic news and data, we are not far from where we started the year. At least we are not going backwards right?
This week the S&P Case-Shiller Home Value Index showed a slight increase in home values for the 4th straight month. Before you go out and celebrate, the increase was .8% which is basically unchanged in my book. Additionally, home values are down .9% from the same time last year. Sum it up, the housing market is flat.
The Mortgage Bankers Association reported that purchase applications rose 2.4% and refinance applications dropped 1.6%. Purchases represented 19% of total applications and refinancing was 81%.
Mortgage rates have dropped back to just above the record lows set earlier in the year. Rates this low would normally stimulate a buying frenzy however concerns over unemployment continue to keep prospective purchasers on the sidelines.
Other data reported this week:.
• Consumer Confidence dropped to the lowest point since the start of the year.
• GDP increased slightly which is a positive indicator. However the overall number for Gross Domestic Production still remains at an anemic level.
• Jobless claims continued their slow decline. Just over 450,000 people filed first time claims last week which is certainly better than the 500,000 we had seen just a few weeks ago.
• Construction Spending dropped 1.0% in July. The prognosis for August is that we will see improvement.
• The ISM Manufacturing Index shows an increase manufacturing which is a positive economic sign.
• Consumer Spending rose more than forecast reinforcing the Fed's statement that the economy will continue to grow at a "modest" pace. (I still don't know what "modest" means)
• The Consumer Sentiment report for mid September indicates that feelings about the future of the economy are not very optimistic in the near term. However we have seen in the past that this can change quickly.
What's up with GMAC and JP Morgan Chase? In the last week both companies announced that they are suspending foreclosures in over 20 states. The reason, potential technical mistakes in the filings. Lawyers for homeowners are seizing the opportunity and petitioning courts in record numbers to have the initial foreclosure filings thrown out. This means that these companies could have to start all over with their filings.
Economic reports due out next week are:
• Monday October 4th - Pending Home Sales
• Wednesday October 6th - MBA Mortgage Applications and ADP Employment Report
• Thursday October 7th - Weekly Jobless Claims
• Friday October 8th - Employment Situation
Your Mortgage Consultant,
JJ Mack
916-517-1800
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