This week was certainly exciting for any economic data junkie. From housing, to employment, to an election, we had enough economic data and events to make your head spin.
Unless you have been living under a rock, you know that the House of Representatives is going to be under the control of the Republicans starting in 2011. What does this mean for the economy, housing and government?
The reality is that we are most likely facing government gridlock when it comes to legislative changes moving forward. Now that the Senate is controlled by the Democrats and the Republicans control the House, passing laws will be much more difficult.
The Democrats pushed through virtually any piece of legislation they wanted in the first 2 years of the Obama presidency because of the power of controlling the House and Senate. Despite the objections of many Republican officials, two major bills were passed. (Excuse me, rammed down the throats of the American public) The Wall Street Reform Bill and the Healthcare Reform Bill. (Lots of bad blood was created between the parties over this)
Although elected officials, all the way up to the president, have pledged to get both sides of the aisle working together, the odds on that happening are slim to none. The Republicans have stated their #1 goal is to repeal the Healthcare Reform Bill. Since the Republicans are focused on getting rid of the flagship piece of legislation that the Democrats passed, how can there be a meeting of the minds?
The other big news of the week was the Fed's announcement on the launch of a new round of stimulus to bolster the economy. This new initiative is being called "QE2" which stands for "Quantitative Easing Round 2". The markets reacted very favorably to this announcement with the stock market rallying almost 200 points. The focus of QE2 is to decrease the cost of borrowing by driving interest rates lower.
On to the market news:
• The ISM Manufacturing Index and the Non -Manufacturing Index both showed improvement. We are starting to see an improving trend in spending on both manufacturing and services which is a sign of economic growth.
• Unemployment remains at 9.6% nationally. The positive sign in the report is that the private sector added 151,000 last month which is hopefully an indicator that small and medium sizes businesses are doing better. The big concern regarding employment is that 2 million unemployed are set to lose their benefits in December unless Congress votes to extend them.
• Mortgage applications for purchases increased slightly last week increasing 1.4%. Refinance applications declined 6.4%.
• It was announced that homeownership is at the lowest point in the last decade. (I guess foreclosures and tight credit may have something to do with that)
• Pending Homes Sales unexpectedly declined 1.8% in September. This is just another indication that the housing crisis is going to take quite some time to mend.
Next week will be quiet as there are only a few significant reports due out plus a national holiday:
• Wednesday November 10th - Jobless Claims and MBA Applications
• Thursday November 11th - Market are closed for Veterans Day
• Friday November 12th - Consumer Sentiment
Your Mortgage Consultant,
JJ Mack
916-517-1800
Friday, November 5, 2010
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