December 29, 2009
December 29, 2009 by admin
The winning streak for the stock market finally came to an end today as the Dow closed down slightly. Mortgage interest rates continue to move higher as the end of the year approaches. Yields on the ten year bond are now past 3.8%, driving fixed interest rates for thirty year home loans well past 5.25% and sending fifteen year loan rates closer to the five percent level. The uptick with interest rates began in early December as inflationary pressure is beginning to surface in the economy. The overall improvement in equities are brining in more investors, pulling cash out of the bond market and into the stock market. The normal supply and demand correlation between bonds and stocks has been relatively mutated this year as interest rates have been heavily influenced by the FOMC to keep mortgage rates attractive for homebuyers. The low interest rates helped to push home values up for the fifth straight month according to a report released today from Case Schiller.
Volume in the markets is always a concern during the holidays. The lower volume can influence the market to rise or fall in greater swings during this period. The market has shown resiliency despite the fears that the recovery could take significantly longer than previous recessions. Job growth remains one of the largest concerns for the economy heading into the new year. The non farm payroll report which is due to be released at the end of next week will certainly set the tone for the economy in January and the first quarter. Following a month in which the market improved sharply for the November as job losses decreased, escalating pressure for the market to start adding jobs in the near future.
Fannie Mae and Freddie Mac are back in the news as both firms will require additional capital injections into 2010. The companies were given further financial leniency with their capital ratios that were intended to keep their loan portfolios in check. The controversial decision to eliminate the caps on the agency lenders comes at a time when both lenders are playing a critical role in helping to stabilize the real estate market. The agency lenders are being relied in conjunction with FHA to provide the necessary secondary financing in the market. There role has been heightened due to the failure of the mortgage backed security market as investors in MBS have been reluctant to reenter the secondary lending marketplace.