Some interesting Market comment.  Tim Lampe, Incline Village Realtor

The past two weeks have been remarkable in our own financial markets, as this update attempts to explain and describe. It was as if the markets rose up and reminded us that things are not as dire as we've been making them out to be.

In the meantime,  conforming interest rates continue t be very low:  4.5% with no points for a highly qualified buyer (primary or secondary residence).

7/1 Jumbo ARMS are as low as 4.125% with no points (up to $850,000 of loan amount) for a highly qualified buyer (Primary residence).

 

July 14, 2010

 

KEY INDICATORS [7/12/10]

 

Gold $1206.80/ounce up]

Crude Oil (Brent) $74.99/brl [up]

U.S. Dollar to…

    Euro .7960 [down]

    Japanese Yen 88.39 [down]

6-mo Treasury Bill Yield 0.19%

10-yr Treasury Note Yield 3.05%

[6-month down 2 bps, 10-yr up 9 bps]

11th Dist Cost of Funds 1.791%[-]

30-yr Fixed-rate Mortgage 4.95%

15-yr Fixed-rate Mortgage 4.43%

1-yr ARM 4.26%

[HSH averages rates: 30-yr

up 2 bps;15-yr up 2 bps; 1-yr ARM up 98 bps]

 

Mortgage Bankers Association Mortgage Applications Index

week ending 7/2

  Overall

    721.5 (up 6.7%; up 8.8%

the week prior)

  Purchase Money Loans

    168.6 (down 2%; down 3.3%

            the week prior)

  Refinancing Loans

    3944.6 (up 9.2%; up 12.6%

the week prior)

 

Jobless Claims 7/3

    454,000 – prior week 472,000 – continuing claims at 4.616 m

 

Consumer Credit May

    Down 4.5% month-to-month annualized – Revolving credit down 10% - Nonrevolving credit down 1.4%

 

Weekly Commentary

 

We concluded last week with a reminder to expect the unexpected. As if on cue, the sliding of the stock markets slowed to a halt on Tuesday and indices began again to rise. The Dow Jones Industrial Average finished the week at 10,216.27. Meantime, the 10-year Treasury note yield rose very slightly to 3.06%, and the HSH Assoc. mortgage rate average (including jumbo rates) held its ground at a very low 4.95%.

 

Why the cheer in the markets when it had begun to look like a potentially protracted slide? Two primary reasons were given by most analysts. First, the markets were “oversold,” meaning that investors had overreacted to recent worries. By this view, it would seem that most of us woke up last Tuesday saying, “Boy did we overdo it last week! It’s time to start buying stocks again at these low levels!”

 

The other reason given by analysts is that investors in the markets realized we are all facing the likelihood of gratifyingly good earnings reports from key American corporations in the near future. And indeed, early word on reports from Alcoa and CSX has been favorable and the soon-to-be-released report from Intel, if positive, should prove to be a market-mover, taking stocks higher.

 

Okay, but what about the longer view? While many unknown factors could change things, the likelihood that the economy will continue its current slow-go trend remains good.

 

Consider: (1) Many economic stimulus programs are expiring and the results are difficult to predict—though, the end of the $8,000 and $6,500 tax credit programs for homebuyers suggests that the economic path could be a bit rockier ahead. (2) The debt-strapped countries of the world will face a stream of steady requirements to repay their debts, and they will have to borrow heavily to make the payments. (3) Add to the large, visible debt that needs to be repaid by debtor nations is a mountain of less obvious short-term borrowing by these countries—amounting to an estimated $5 trillion that will have to be repaid over the next two years.

 

If these factors weigh more heavily on the world credit markets in the future, there is a chance that we will see not only volatility for interest rates but also potentially higher rates, further slowing the recovery. It will be wise to keep our eyes wide open to these developments, ready to anticipate higher rates and slower markets.