By Fred Arnold
The loud crash you heard last week is the refinance boom coming to a screeching halt. Mortgage rates have been steadily rising and on Thursday of this week rates took a big jump. The European Debt Crisis has been on the minds of investors and that has attributed to the market volatility in recent weeks. It was announced on Thursday that the framework for a plan to keep the Euro debt crisis under control is now in place. Although many investors believed that this news was forthcoming for some time, and the market has been rising because of it, it should be no surprise that upon the release of the announcement the market jumped 339 points.
In case you didn’t know, good news for the stock market is almost always bad for the bond market which is generally a good indicator of the movements of mortgage rates. Over the last two weeks rates have increased a little more than a quarter of a percent. However after the release of the Euro news on Thursday, mortgage rates jumped a quarter percent in just 8 hours. The question is how will the increase in rates impact home purchases?
Housing reports released last week continue to show a mixed message. New Home Sales jumped a larger than expected 5.7% while Existing Home Sales showed a decline of 4.6%. What makes the picture on housing even more confusing and difficult to forecast is that we have no consensus on the housing data. The housing reports this week show home prices declining while just last week the Case-Shiller Home Value Index showed house prices stabilizing and even rising slightly. The 800 pound Gorilla in the room is the 250,000 homes the government owns and needs to get rid of. These homes, in addition to the millions the banks own and those in foreclosures will continue to provide great opportunities for those who want to buy a home to live in!
First Time Jobless Claims continue to remain above 400,000 which reinforces the on-going weakness in the employment sector. Next week the ADP Employment Report and the National Employment figures will be released.
GDP is on the rise and showing real signs of strength. So much so that experts are raising their forecast for GDP in the 4th quarter of 2011. This is a positive sign for the economy and what is even more exciting is that every quarter this year GDP has increased. (1st Quarter rose .4%; 2nd Quarter increased 1.3% & 3rd Quarter was up 2.5%) So with the slow expansion of the economy you would expect Consumer confidence to be rising. Not so fast, it appears that more and more people are disgusted with what is happening with government with all the fighting and finger pointing. The latest report on Consumer Confidence shows that the public has the lowest confidence in the recovery since December and many attribute government dysfunction as the main culprit.
This holiday season expect the consumer to open up their pocketbook a little, but consumer confidence to stay low because of this distrust in what happening at many State governments and the National government! What scares me most is that we are heading into a Presidential election year which means the real fighting and finger pointing has not even started.
This week’s market moving reports are:
- Tuesday November 1st – ISM Manufacturing Index
- Wednesday November 2nd – MBA Applications and ADP Employment Report
- Thursday November 3rd – First Time Jobless Claims
- Friday November 4th – National Employment Report
As your mortgage professional, it is my pleasure to be a resource to you for all of your mortgage financing and real estate needs. Please feel free to contact me at any time with any questions you may have. I can always be reached at Fred@FredArnold.com or 661-505-4300.