Market News Update - Home Sales Slow as Stock Market Rises

In the absence of any major economic data this week, the stock market seems to be content with going on with business as usual and rising almost daily. The stock market has been hitting new record highs this week and the DOW at 16,000 is in sight.

The market got a big boost on Thursday with the announcement from Janet Yellen that the Fed needs to be cautious in pulling back stimulus. Ms. Yellen is, pretty much, the likely heir to become the new Fed Chairman. She is desired by both republican and democrats in that her views of economic policy seem to be well balanced between conservative and liberal policies.

Housing, which was for many months the bright side in the recovery, seems to have slowed significantly in the latest reports. More housing reports are due out next week, however the latest info suggests significant slowing.

The frenzy for home purchases has cooled dramatically. Just a few months ago, trying to purchase a home in Sacramento, you would have been on a long line of bidders trying to get their hands on the few houses that went up for sale. Currently, sales in the area are down an estimated 25% from the same time last year.

Rising mortgage rates are partially to blame, as the cost of borrowing has been increasing as of late and is almost a full percentage higher than they were a year ago. The Mortgage Bankers Association reported that, once again, loan applications for mortgages are down. Purchases declined 1.0% and refinances dropped 2% following the previous revised decline of 4%. With interest rates rising and considerable insecurity by consumers about the economy, there is a likelihood that future real estate reports will be less than stellar.

When you look at mortgage application volume we see that they have declined 17% for home purchases since May. The MBA reports on a weekly basis and we see drops of 1%, 2%, etc… however, when you look at the activity over a larger period of time, the downward trend becomes clear.

Does this mean that real estate and mortgage professionals need to panic about their financial futures? I personally do not believe that is the case. When prices drop slightly, more than likely you will see purchasers jump back into the market. Right now the market is in a transition to a new reality of slightly higher mortgage rates and home purchasers are very sensitive to this.  However, just like we get used to so many other happenings in the world, purchasers will adapt to slightly higher mortgage rates. 

Next week is very light as far as market impacting reports:

·        Monday November 18^th – Housing Market Index

·        Wednesday November 20^th - MBA Purchase Applications, Consumer Price Index, Retail Sales, Existing Home Sales and FOMC Minutes

• Thursday November 21^st - First Time Jobless Claims and Producer Price Index
• Friday November 15^th – Industrial Production

I appreciate your business and look forward to talking to you soon! Have a great day!!!
 
Sincerely,

Cindy Tomlinson
Loan Officer

USLending Company

 

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