May 13, 2009
May 13, 2009 by admin
The stock market dropped sharply in trading on Wednesday as the two major economic reports of the day provided investors with renewed concerns that the economic recovery may not be in the near term. The news from the retail industry this morning provided a glimpse into the lives of consumers who are still reluctant to spend in a tough market. The retail sales report for the month of April indicates that sales were off by almost 9% compared to April of 2008. This marks the eighth month out of the last ten that retail sales have been lowered than expected. The retail market is trying to recover and is pinning its hopes to improved consumer confidence and a recovery in the job market, both of which are likely to be many months away.
The housing industry is continuing to see record home foreclosures. According to a report released today by RealtyTrac, the month of April saw a record number of properties go into foreclosure. The rapid increase in home foreclosures will certainly draw the attention of the government that is trying without avail to slow down property foreclosures. The pressure could again mount to try yet another approach with banks, lenders and investors to try a more proactive measure to try and get in front of the home foreclosure crisis.
To date, all of the government’s methods for dealing with foreclosed properties have been reactionary and non effective. The recent push to try and help home owners refinance who are under water in their property and push for loan modifications is not likely to have much impact without a meaningful change in the employment sector. More and more home owners are simply choosing the option of sending their keys back to the mortgage company an opting to walk away from their homes and become renters. According to a report from CBS Marketwatch today, there are presently over 3.4 million homes for sale in the country and a growing number of these are bank owned or foreclosed properties, which have a likelihood of selling for 20% below comparable home values in the area, further driving down home prices and spiking foreclosures.
On the mortgage front, the downward spiral in the stock market is bringing some need relief to the recent upward movement with mortgage rates. The uncertain times in the equity market have pushed more investors into bonds, the yield on the ten year bond had dropped to 3.1 on Wednesday, down almost twenty basis points from last week. This downward push should help bring long term fixed rate mortgage loans closer to five percent for thirty year loan terms and under five on fifteen year loan terms. Lower fixed rate loans will help the housing market, but are only a small variable in helping to bring home buyers back into the mix.