Global Economic Weakness Comes Home; Existing Home Sales Tumble – Daily Mortgage Rate Update for August 24th, 2010
Rise in Yen vs. other currencies has investors spooked; US home sales fall 27.2% to lowest level in 15 years ; WSJ article questions Fed’s conviction on latest action – Daily Mortgage Rate Update for August 24th, 2010
Asian markets sold off heavily overnight on concerns about the rising value of the Yen versus other currencies. Traders were concerned that the appreciation of the Yen will make Japanese exports more expensive, adding further concerns about the archipelago’s economic growth prospects. Much as this may seem like somebody else’s problem, it can have an effect on the world economy. While the appreciation of the Yen makes US exports to Japan more attractive, if it causes the Japanese economy to slip into recession, consumers there may not have any money to spend on US exports. Remember that the Japanese economy was also in focus last week as growth there slowed to a negligible pace.
The National Association of Realtors reported on existing home sales in July this morning, and the results were dismal. Home sales declined at a year-over-year pace of 27.2%, falling to a pace of 3.83 million units per year. While this information sounds very bad, bear in mind that the figures reported by NAR annualize a single month’s results. The housing sector has been viewed as the destroyer of the economy, and is widely seen as the sector that will lead the economy back to normalcy in the future.
One bright spot in the Existing Home Sales report was the stability in home prices it showed. The median home price in the US rose slightly to $182,600, suggesting that the previous free-fall in housing prices may have disappeared. Still, the report suggested there are as many as 12.5 months worth of homes currently on the market, a level too high to sustain level pricing for long.
The Wall Street Journal reported this morning on the depth of discussion and dissension at the most recent meeting of the Federal Reserve Open Markets Committee earlier this month. According to the article, the meeting was one of the most contentious of Ben Bernanke’s term as Chairman of the Federal Reserve, however, the level of dissent was disguised in the final 9 to 1 vote to approve the new quantitative easing action, as many of the members who disagreed with the action had no vote in the meeting. This article has further fueled Wall Street’s concerns about the efficacy of this latest action. Their concern is that if the Fed action fails to stabilize the money supply, more drastic action may be needed.
Mortgage and Treasury pricing has improved this morning on these reports, and the 10-year Treasury yield crashed through an important resistance level at 2.55% earlier, currently sitting at 2.52% after having touched 2.49%. Still, there is a substantial degree of volatility in pricing. I feel it is safe to float in the longer term because there appears to be no end in sight to the poor economic data. In the shorter term, especially for loans closing within the next 7-15 days, the volatility may be uncomfortable for loan originators and borrowers. You may want to lock to avoid this.
Tomorrow we’ll get significant economic reports on Durable Goods orders and New Home Sales. If you have questions regarding Rhode Island Refinance Rates, or whether or not to lock your loan, please don’t hesitate to contact me by cell at (401) 263-8655. Have a great day!
Related articles:
Weekly Recap for August 16th-20th
Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.
August 24, 2010 by Dan Hartman · Leave a Comment
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I have worked as a residential mortgage advisor since February of 2000 and a part of the founding team here at Province Mortgage. We believe that by doing right by a family today, we can create a relationship for life, and, hopefully, and ambassador who will share the experience with others. It is our team of professionals that helps us to create this experience.
