LOW mortagage rates are here only for a limited time!!

Finally we can breathe a little easier about the employment sector, at least for the moment.  Although the national unemployment level increased slightly from 8.2% to 8.3%, the underlying numbers show significant improvement in the labor market.  In July there were 163,000 private sector jobs added to the workforce where in June we only had 73,000.  The jump is far more than analysts were expecting.  The fact that the unemployment rate increased .1% is more of a headline than anything else.  What is most important in this month’s report is the number of people added to the workforce.  The stock market loved the report as of the opening bell with a jump of out of the gate of more than 150 points on Friday morning.

For the investors that have been betting on Federal Reserve Chairman Bernake to launch another round of stimulus, this latest jobs report certainly will slow down the implementation of any new economic stimulus program.  The irony of it all is that for weeks investors have been believing the Fed was going to do something, however I have repeatedly written in my weekly reports that there has been absolutely no indication from the Fed that they were ready to do something now.

This week the Fed released their FOMC announcement stating they are prepared to take more action if the economy warrants it however there is no plan for any action at this time.  This is the same announcement word for word that they have said all year.  Why is it that I have known this all along but investors who are in the market every day don’t seem to understand that the economy is not currently in a place that the government is going to incur more debt to stimulate growth?

Housing continues to show signs of life.  The S&P Case-Shiller Home Value Index for May showed a higher than expected gain of .9%.  This is the third strong gain in a row following 0.7 and 0.8 percent readings in April and March.  Prices are still .7% lower than the same time last year however the gap between last year and this year in prices is closing which is yet another positive sign for the housing market.

The Mortgage Bankers Association reported that the prior week’s applications for mortgage financing were virtually unchanged.  Applications for purchases declined  2% while refinance applications increased only .8%.  Mortgage rates are coming off their record lows and that undoubtedly is going impact mortgage applications.

It is my prediction that we will see refinance applications slow down further as interest rates start to creep up.  I am however very excited in that it is my feeling that the slight increases in mortgage rates will stimulate buyers to jump into the market, especially on the heels of the better than expected employment report.

In many areas of the country real estate professionals are reporting that housing inventories are at the lowest level they have seen in many years.  We are even seeing some bidding wars for houses by purchasers who are determined to land their dream house.  Despite the prices on these homes being driven up through competition, appraisals are still not supporting the value increases which is causes buyers bidding up prices to come up with extra cash to pay the difference between the appraisal value and the contract price.

Consumer confidence improved slightly which is yet another sign that the economy is not quite as bad the media will lead us to believe.  Everything we see on TV and hear on the radio we must filter realizing that the media will make any headline sensational as that is how they get ratings.

JJ Mack