One again mortgage rates are dropping. For a while rates were marching higher, of course higher being a relative term since mortgage rates are still at historic lows. The recent reversal of direction has nothing to do with the government's new stimulus package and Recent declines have everything to do with weak economic news, European debt issues, and let us not forget the latest, the escalating hostilities between, North Korea and South Korea. (I don't know if escalating is the right word because basically North Korea attacked South Korea and that in most circles is considered a declaration of war.)
The first thing that I want to caution you on is not to get caught up in any major market movements this week. Because of the Thanksgiving holiday, trading is light so investors have the ability to cause major shifts in the indexes which is not really reflective of the market.
Once again mixed reports fill the landscape reaffirming that we are trudging along ever so slowly. The news out of the Fed certainly put a damper this week on hopes for economic recovery anytime soon. The minutes of the FOMC meeting were released and it clearly states that the Fed is lowering their projections for economic growth in 2011 and beyond. Additionally, they are also painting a less optimistic picture about unemployment in the next year.
Originally the Fed has been stating that they expect unemployment to drop to 8.3 - 8.7% in the 4th quarter of next year. Their latest projections are that unemployment will only decline to 8.9-9.1% which is still very high for any type of recovery to really take hold.
In real estate news, existing home sales fell 2.2% after a healthy increase last month. The report indicated that the weakness in the market is broad based and that no one sector of the market is responsible for the drop. The National Association of Real Estate stated that part of the drop in home sales is due to the fact that qualified buyers are being rejected for mortgage loans. Of course the other part of the equation is fear about losing one's job still exists.
The supply of homes on the market for sale dropped from 12 months to 10.7 months which is a step in the right direction. The concern on the horizon is this new term being used called "shadow inventory". Shadow Inventory is the number of homes that are being held by banks that are not up for sale. At the present time, there are approximately 2.1 million homes that the banks are holding which brings total inventory up to 6.3 million.
New Home Sales declined a larger than expected 8%. This continues reinforce the fact that low mortgage rates is not enough to stabilize the housing market.
Great news for First Time Jobless Claims came out today. Jobless claims dropped to $407,000 which is the lowest it has been since July of 2008. Let us hope that this is the beginning of a positive trend in employment.
Lastly, Gross Domestic Production came in slightly higher than expected which shows that, although sluggish, the economy is still growing which is another positive for the country.
Significant market reports due out for next week are:
• Tuesday November 30th - S&P Case-Shiller Home Value Index
• Wednesday December 1st - MBA Mortgage Applications, ADP Employment Report, ISM Manufacturing Index, Construction Spending
• Thursday December 2nd - Jobless Claims and Pending Home Sales
• Friday December 3rd - Employment Situation
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