Economy, Debt Ceiling & Interest Rates, Oh My...
Friday, August 12, 2011
by Jeremy M. Salemson
Chief Executive Officer, Corporate Investors Mortgage Group, Inc.
Hello View from the Porch Readers - Welcome to the August Housing Blog!
August is usually a relatively calm month for trading and economic data as most of Washington is out on vacation, and the markets tend to stay within a narrow trading range. But certainly not this year!! August has started off with a bang! Jobs, Economy, Debt Ceiling, Interest Rates…and that's all in just the first few days of the month. To say we've had market volatility would be a huge understatement this month, and with the rhetoric that we received from the Federal Reserve regarding a timeline for keeping interest rates low, I believe that this speaks to the severity of the economic situation both here at home as well as across the Globe.
We had seventeen consecutive weeks of jobless claims at or above the 400,000 figure prior to this week, with the figure finally dropping below the 400,000 threshold for the first time this week since early April. Unemployment for the nation still stands just above 9%, so it's not surprising that we continue to experience market weakness and volatile market fluctuations.
The silver lining in all of this is that because of domestic and global uncertainty, we've continued to witness the "Flight to Quality" with Treasuries, and because of that Treasury Yields have dropped significantly and so have mortgage rates. We've seen Treasury Yields drop almost an entire point within just a few weeks - giving us unprecedented downward movement within recent trading history.
So the Treasury Train keeps rolling along - making it a wonderful time for homeowners who want to refinance, and helping to make homes as affordable as we've ever seen them for potential homebuyers. Conventional Wisdom for Treasury movement was kicked to the curb last week after the S & P Credit downgrade of the US with the markets much more concerned with the economic headwinds and not the lackluster rhetoric that was delivered by the ratings agency. In addition to the US Credit Rating, S & P also downgraded Fannie and Freddie - the two Government Sponsored Enterprises.
So to recap - Global and Domestic uncertainty spells good news for housing participants here in the US - and while attractive mortgage rates are not a long term solution, they do provide a much needed boost - with hopefully some economic domino improvements in the weeks and months to come.
Well that's all for now - I look forward to talking with you in September. If you have any thoughts on topics you would like see covered as we enter the fall housing season, please email me at firstname.lastname@example.org. We want to be your source for up to date data for this very exciting and always changing industry that we all call home.
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