Mortgage Market Update - 3/18/2011

Before I even begin to write about the economy, let us not forget about the people who are suffering and struggling in Japan. My heartfelt wishes for their safety goes out from my heart daily.
The economy which has been on a roll for the last few months now once again seems to be in limbo as the focus on how Japan's nuclear emergency may take a toll on the world economies. Since Japan is not only the 3rd largest country in the world, they also produce many items for many countries. As you may know, production of these products whether it is automobiles, parts, electronics, or accessories has come to a virtual standstill.
Despite many areas of the economy that improve, housing continues to be that one area that just won't wake up. Housing Starts last month dropped 22.5% to the lowest point on record since 1959. Mortgage applications for housing purchases also dropped despite the fact that mortgage rates have dropped significantly over the last 2 weeks. Additionally there continues to be much speculation that home prices may continue to drop which will contribute to even more people waiting on the sidelines so they can secure an even better deal on purchasing a home.
A very misleading report was released stating that in many parts of the country the cost of owning a home could be less than what you pay in rent. The issue with the report is that when they compare mortgage payments to rent payments, they left out 2 critical items - the real estate taxes and homeowners insurance. (Since the report did not include taxes and insurance, does that mean I don't have to pay mine anymore?)
Inflation appears to be increasing rapidly when you read the headlines. However when you take out the volatile food and energy prices from the report, inflation on the wholesale and retail level seems to be increasing at very slow pace and remain very much under control.
The Fed announced this week that they intend on keeping interest rates low for, as they put it, "the extended future". Additionally the Fed went on to state that they see the speed of the recovery increasing slightly.
Overall when you look at all the reports as of late, with the exception of housing, we have seen a nice improvement in the markets. (Well up until this week anyway)
The stock market which had been rising rapidly gave back virtually all the gains this year in just a few trading days this week. Investors are very concerned about the potential impact the disaster in Japan can have on the world economies.
Lastly, my idiot report of the week goes to "Bloomberg.com". Bloomberg.com reported that First Time Jobless Claims came in at 385,000 this past week. The unnamed person who wrote the commentary indicated that this number shows a "continuing improvement" in the employment picture. (I'm sorry but 385,000 people losing their jobs and that being about the same number of people that lost their jobs about 2 months ago does indicate and improving trend).
Reports due out next week are: • Monday March 21st – Existing Home Sales• Tuesday March 22nd – Federal Housing Finance Agency House Price Index• Wednesday March 23rd - MBA Mortgage Applications and New home Sales• Thursday March 24th - First Time Jobless Claims• Friday March 25th – GDP and Consumer Sentiment

Have a good weekend!

JJ Mack
916-517-1800