January 28, 2010
January 28, 2010 by admin
Mortgage rates have dropped for the second straight week as bond yields continue to benefit from the uncertainty in the marketplace. Yields on the ten year Treasury bond have dropped down to 3.63%, gaining over twenty basis points in the New Year. Fixed rate home loans have dropped by a little over .125% this year, sending fixed rates for thirty year home loans to 5.125% with most major national mortgage lenders. Fifteen year fixed rate home loans continue to be in the mid four percent range. The market uncertainty has benefitted the mortgage industry in helping to keep interest rates near historic lows, but the enticing low interest rates appear to be having minimal impact on rejuvenating the housing markets. Dismal reports for new home sales and existing home sales for December are clearly a strong indicator that housing is anything but near a bottom. The lack of job growth remains the nations number one road block to fixing the housing markets and providing a quick turnaround for the economy. President Obama has pledged additional assets to rejuvenate small businesses and has reiterated the administrations number one goal is to get the labor markets corrected.
The markets have been heavily influenced by the political turmoil over the past two weeks. The Volker plan to reign in banks sent the market south last week, and renewed concerns over the integrity of the TARP system as it relates to the AIG bailout were raised again this week. Politicians are finally getting the message that main street is fed up with bonuses and lies from the old boy network of politics. The recent hearings for Timothy Geithner and Henry Paulson should have occurred months ago, as soon as it became public knowledge that bailout funds for AIG were being passed directly through to Goldman Sachs, who bet against the housing markets and netted nearly fourteen billion dollars in taxpayer monies that helped position the company to post record earnings and bonuses exceeding $500,000 per employee. The relationship between the TARP recipients and the former executive of Goldman Sachs (Paulson) are no mere coincidence. The unfortunate outcome is there is no recourse to recover the “stolen taxpayer money” and no political fallout for Mr. Paulson.
The Federal Reserve was back in the news this week, with pledges to keep interest rates low for the foreseeable future. At this point it is hard to imagine a scenario where the government is not subsidizing housing well into 2011. Eliminating the tax rebates at the end of April or pulling out of the mortgage back security market seem highly unlikely at this point. Job growth will take months and the recovery is going to last years, according to many economists who recognize the worst of the recession may be over, but there is no magic pill to recovery. Corporate earnings have also influenced the markets over the past two weeks as companies across many industries have beat expectations, but are offering very cautious growth outlooks for the future.