August 20, 2009
August 20, 2009 by admin
The stock market is trying to push for three days of positive movement as investors appear to be cautiously moving back into the equity markets. The market is moving without a significant number of economic reports and corporate news has slowed down as the third quarter is well under way. The headline of today’s economic news was the release of the weekly jobless claims report, which indicated another week of higher than expected job losses. This remains one of the most closely followed reports on a weekly basis as an improvement in the labor markets would truly signal a rebound in the overall economy. The disappointing news that job losses increased last week did not seem to derail the equity markets from pursuing a broader increase.
The news out of the housing markets continues to send mixed signals regarding the state of the real estate industry. This week, the report of new housing permits was much lower than anticipated. This follows a strong run of reports on home sales for the month of July. Today, the market is digesting another dismal report indicating home foreclosures are still moving higher. The news out of the MBA (Mortgage Bankers Association) painted a grim report of the real estate market and raised further doubts to the proposition of the governments making home affordable program. The number of properties that are currently over thirty days delinquent on the mortgage increased past thirteen percent and the percentage of homes moving into foreclosure is now over four percent, up a full percentage point from the first quarter of 2009. Home foreclosures, tend to be a lagging indicator of the state of the marketplace as they take months to catch up to the fallout in the job sector. Many states have recently passed legislation that is aimed at helping home owners modify their mortgage loans, while providing them a moratorium from the lender to try to renegotiate their mortgage terms. This process is helping a percentage of home owners to remain in their properties, but is also delaying the true accuracy of the current foreclosure crisis that the real estate market is facing. Home foreclosures have had a devastating effect on real estate values, as they lead to properties selling between 20-30% below the price of comparable homes, eroding the overall value of properties in a given area. The further home values decline, the more incentive home owners have to simply walk away from properties where their loan to value ratio is in excess of 150%, further adding stress to the market and creating a downward spiral.
The lack of market movement has been good news for fixed mortgage rates. Long term mortgage rates remain in the low five percent for thirty year loan terms. The yield on the ten year bond is hovering around 3.5%, a thirty day low. Bond yields have remained low as investors are searching for safe alternatives to the equity market as they balance their investments for the second half of 2009. The historic low rates have helped to stabilize the market and create more affordable house payments for buyers who have been on the fence. There is a strong belief that the low mortgage rates will last for the next several months, through peak home buying season, welcome news to the housing market.