October ends on a down note
October 30, 2009 by admin
October extended its streak today as being one of the most challenging months for the market and economy. This month has been a wild roller coaster ride for mortgage rates and the stock market. Earlier in the month, fixed mortgage rates dropped to their lowest levels since January as the yield on the ten year Treasury bond closed in at the low three percent range. Following a spectacular run by the stock market and inflationary pressure from rising oil prices, long term rates rose fairly quickly through the midway point of the month. The strong gains in the stock market, reached a pinnacle when the DOW rose above ten thousand for the first time this year. These gains proved to be elusive as investors grew nervous about housing and the economy. The market managed to pair these gains, dropping over six hundred points in the process.
This week has followed the months lead, and proved to be another wild ride for the market. The stock market dropped sharply earlier in the week, following a poor performance in the new home sales market for the month of September , renewing concerns that housing would face a severe falloff if the governments tax rebate is not extended. Investors were quick to jump on a strong report for GDP (gross domestic product) a measure of economic growth, which turned positive for the first time in the past twelve months. Positive GDP growth sends a strong signal that the economy has recovered from the worst of its recession and brighter days are in the future.
Today, the market again turned aggressively bearish. Investors quickly pulled capital out of the equity markets, sending the DOW down by almost three hundred points. The pullback in equities has slowly influenced a retracement in the ten year Treasury bond and some needed relief for mortgage bonds and rates. Fixed rate mortgage loans are now hovering in the low five percent range for thirty year loan terms. Heading into the month of November mortgage rates are in great shape and this should continue to benefit the housing markets.
The next sixty days will prove a critical time to set a foundation for an economic recovery in 2010. The most critical area of the economy is the job market, which has shown little to no signs of improvement to date. Economists will point out that job growth is a lagging indicator for economic recovery, but this recession has hit main street extremely hard and could prove to be more challenging to turn the corner. Extending and enhancing the housing tax credit appears to be an administrative priority, and one that should further stabilize the economy and housing markets. Speculation that the tax credits will be extended beyond first time homebuyers is a significant step by the administration to fast track a meaningful solution to stabilize home prices and sales.