November 17, 2009
November 17, 2009 by admin
November is turning out to be a fabulous month for the markets. The DOW has surged past 10,000 and is poised to finish the year on a high note. The momentum from a strong October has carried through and investors are upping their wagers that the economy will make a remarkable comeback into 2010, despite lagging job growth. The strong push from equities has had zero impact on pushing up long term mortgage rates. The market paradox comes at a great time for new home buyers and home owners who have not taken advantage of a mortgage refinance. Yields on the ten year bond have dropped almost twenty basis points over the past thirty days and are once again closing in on the 3.3% level. The drop in bond yields has helped bring long term rates lower for thirty and fifteen year mortgage loans. Most national mortgage lenders are offering thirty year loans at 5.125% or lower and fifteen year loan terms continue to offer rates well into the four percent range.
The market will soon enter a lull in economic and earnings as investors and economists take aim at the holiday shopping season. The next 40 days will be extremely critical for retailers to try and salvage their years on a positive note. The fourth quarter can make or break retail companies as witnessed from years past when companies who have posted disappointing holiday sales figures have struggled to stay in business. Today, two of the nations largest retail organizations (Target and The Home Depot) provided updated earnings and forecast sales for the balance of the year. The companies remain cautiously optimistic that the consumer is regaining confidence and beginning to show signs of renewed appetite to spend. This news was another signal that there is growing confidence in the overall economy.
The homebuilding industry received great news last week when the government agreed to extend the first time home buyer tax credit, as well as a new credit aimed at move up home buyers. The new construction industry has been struggling to pull itself out of a downward spiral over the last three years as the markets struggled with lending and buyers pulled back due to the economy. Analysts remain divided on the near term prospects for the building industry, citing concerns that the government is creating another housing bubble with the additional extension of the tax credits. Further citing the FOMC role in keeping mortgage interest rates at record low levels, it is fair to say the government has a strong influence in trying to stabilize real estate sales and prices across the country. The next twelve months will be critical for a number of major national builders that have posted losses into the billions of dollars as they struggle to rebalance their business models during these challenging times. Today, a survey from the NAHB showed builder confidence at a subdued level. This should not be a surprise as home builders saw a downtick in sales in the month of September. This report could jump next month with the rebate extension and a solid month of sales.