Posts Tagged ‘existing home sales’

What are the Real Mortgage Rates?

Wednesday, May 6th, 2009

The financial crisis is largely being blamed on the housing bubble that recently popped. Existing and New home sales had fallen considerably over the past year. Not till recently has there been a pause in the dramatic decline. This current pause has been largely attributed to the efforts of the US Government by supporting low mortgage rates and providing a home buyer tax break.

With foreclosures on the rise and property values around the USA still falling, what happens if the government runs out of political will and stops supporting the market?

Credit card rates have been steadily rising over the past few months as default rates have been gaining momentum. With very little political will for credit card debt, banks are forced to raise rates to help offset the rising risk. Over the same period of rising defaults there has also been a reduction in credit card use.

Without a doubt risk has increased on Mortgage financing. What happens when the US Government takes the “training wheels” off? Is the real estate market stabilizing or just reacting to short term government intervention?

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When being Positive can be Dangerous

Saturday, April 25th, 2009

The mood on Wall Street and in Washington went from a very negative outlook to a relatively positive one in a matter of months. Whether they are trying to stay upbeat or believe that the economy has made a turn, the dangers of being positive might outweigh the benefits.

When President Obama took office nearly every speech he or one of his appointees (Treasury Secretary) made was followed by a negative day on Wall Street. Outlook was grim and reality was settling in with Americans. Now the exact opposite is true, speeches appear to be carefully calculated and responses on Wall Street are more positive.

Wall Street for the most part believes the “bottom” is in. Washington believes the worst is over but we could still have some tough times ahead.

Most of the economic data that spurred the month and a half record breaking rally has started to retrench (retail sales and existing home sale). There are still more down economic data months than up which points to a negative trend.

Wall Street points out to investors that the market historically rallies over 50% after a large correction “bottoms”. The Dow Industrial average touched 6440 in February 2009, if it were to rally 50% then the Dow would be 9660. The Dow Industrial Average was closed at 9034 on January 2, 2009. This “rebound” would leave the Dow Industrial up 6.9% from the beginning of the year.

If the economic data continues to slide and the Market starts another correction, what percentage does it historically go down? It seems mostly the positive view is more statistically backed than the negative view. Being negative could save you money while the positive could make you money, what can you afford?

We are taught it is better to think of the glass as half full; but when you only have half left being negative may be the only way to keep it half full.

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Is This More of the Same – Speculation

Monday, April 6th, 2009

The stock market over the past month has gained over 20% on most the major averages. Matter of fact almost everything has been going up, even oil, which still is showing a dramatic reduction in demand on a weekly basis. This feverish buying has been on the heels of some financial data that has marked an improvement from analysts’ estimates.


These economic improvements have been touted by Wall Street as the beginning of the long awaited recovery. According to much of Wall Street the worst is over and the “bottom” is in. There is a population of Wall Street who feel that we have not seen the worst, but interestingly the bulls hog the air time with the financial press. (see Contrarian to Mainstream in Weeks – Stock Market for more insight)

Let’s take a look at some of this improved data:

Retail Sales:

Retail Sales

Retail Sales

Existing Home Sales:

Exisiting Home Sales

Exisiting Home Sales

Durable Goods Orders:

Durable Goods Orders

Durable Goods Orders

The above numbers helped launch the stock market averages to achieve historical gains in a short period of time. Does one month constitute a so called bottom? The data improvement was really in the month to month change. Year over year the data is still quit grim. If this is recovery then these numbers should not look back. What happens if they start to decline again? Where is the growth coming from? Has anything really changed over the past month or two?

Here is a piece of data that did not affect the market the way it probably should have:

Unemployment Rate:

Unemployment Rate:

Unemployment Rate:

Personally I feel that the “bottom” will be reached when everyone gives up on calling the bottom.

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