November 2, 2009
November 2, 2009 by admin
The month of November got off to a fantastic start for the equity markets on Monday as investors looked to reclaim positions following the October sell off. The beginning of the month was aided by several key economic reports which helped to provide investors with confidence to rejoin the market, despite what appears to be a growing concern on the sustainability of the DOW. Mortgage rates are starting the month on an upward push. The yield on the ten year bond closed at 3.42% on Monday, moving up slightly to start the week. Most national mortgage lenders are offering thirty year fixed rate loans at 5.125 or higher, interest rate advertised below five percent are likely to require points or could be on a shorter term such as a fifteen year mortgage.
The housing industry helped to lift the stock market on Monday with a report indicating that pending home sales for the month of September edged higher by over six percent. Existing home sale are certainly poised to have another strong showing this month as investors move quick to lock in and close prior to the expiration of the governments home buying tax credit, due to expire at the end of the month. There is growing sentiment that the governments tax credit will likely be extended and expanded in 2010 to include move up buyers, but without a guarantee savvy buyers are locking into properties and ensuring they don’t miss out on up to $8,000 in free money, while also taking advantage of super low mortgage rates.
The stock market will remain in focus this week as equities and bonds will be closely following a slew of economic reports, including the release of the October jobs report at the end of the week. In addition to the jobs report, the FOMC is meeting this week and will review monetary policy changes, but there is a zero percent chance that rates will be adjusted upward this week. More likely the market will again have a chance to dissect the Fed’s statement for further guidance to their stimulus policies. Of particular interest will be the Fed’s position on handling their exit of support to the mortgage backed loan security market. The Fed has remained committed to helping keep interest rates at key levels for the near future, but have admitted they are looking to unwind their support of this market and shift the responsibility to private investors. This transition could be pivotal in keeping the housing markets on course for a recovery next year. The combination of Fannie Mae, Freddie Mac and FHA are collectively financing over ninety percent of all mortgage issued in 2009. The reluctance of investors to begin purchasing mortgage backed assets is an issue that the Fed will certainly further address in this weeks and upcoming FOMC meetings as they attempt to begin the transition. The Fed will benefit from reviewing key reports such as last weeks GDP report and will certainly focus on the lack of job growth as they discuss potential changes to monetary policy, most economists believe that the Fed will not be in position to begin raising interest rates until next summer at the earliest, good news for home owners and credit card holders who can benefit from the lower lending rates for the next six to nine months.