National Summary, compiled by Steve Peterson and posted by Tim Lampe.  Call me today for any questions or update on the Incline Village Real Estate market.  Many Lake Tahoe Listings are available right now at fantastic prices.

Tim Lampe, Your realtor by choice for 28 years.

There isn't much movement in the markets at the moment. Investors seem to be waiting to see just what the Fed's purchases of Treasury securities will do to interest rates, stock prices, etc. There are many assumptions out there--that inflation will rise, that the dollar will weaken, that the stock and bond markets will benefit (at least at first), but few investors seem really ready to go to the bank and bet on these assumptions.

So it is, in a rather tense way, an exciting time. My guess is that the Fed's actions won't do all that much very quickly. It's the old slowly-turning-ocean-liner effect. And indeed, the economy is NOT going to turn around quickly.

But, on balance, QE2 looks like it may help to stimulate the economy, and that is a good thing. We will need to be patient but, at the same time, we will need to be careful not to miss the opportunities that may arise. It's time to get your personal marketing program tuned up.

 

October 20, 2010

 

KEY INDICATORS [10/19/10]

 

Gold $1336.70/ounce [down]

Crude Oil(Brent) $82.07/brl [down]

U.S. Dollar to…

    Euro .7203 [down slightly]

    Japanese Yen 81.58 [down]

6-mo Treasury Bill Yield 0.17%

10-yr Treasury Note Yield 2.49%

[6-month up 1 bp, 10-yr up 7 bps]

11th Dist Cost of Funds 1.713%[-]

30-yr Fixed-rate Mortgage 4.62%

15-yr Fixed-rate Mortgage 4.07%

1-yr ARM 3.79%

[HSH averages rates: 30-yr

down 4 bps;15-yr down 4 bps; 1-yr ARM up 2 bps]

 

Mortgage Bankers Association Mortgage Applications Index

week ending 10/8

  Overall

    897.2 (up 14.6%; down 0.2%

the week prior)

  Purchase Money Loans

    181.8 (down 8.5%; up 9.3%

            the week prior)

  Refinancing Loans

    5060.3 (up 21%; down 2.5%

the week prior)

 

Jobless Claims 10/2

    462,000 – prior week 445,000 – continuing claims at 4.399 m

 

Producer Price Index (PPI) Sept

    Up 0.4% - excluding volatile food and energy prices, up 0.1%

 

Consumer Price Index (CPI) Sept

    Up 0.1% - core (excluding food and energy prices) was flat – and core annual inflation down to 0.8%

 

Weekly Commentary

 

“The belief that the Fed will resume large-scale Treasury purchases and pump money into the economy is already raising inflation expectations sharply. The yield premium on longer-dated nominal Treasuries over inflation-protected Treasuries has risen to the highest point since the spring as investors seek protection from future inflation. Financial asset prices are generally rising, which should restore business and consumer confidence and recharge spending growth. Higher inflation expectations should also speed up spending decisions.”[Arijit Dutta, Moody’s Analytics]

 

As is often the case, there is a time difference between the assumptions of investors and the actuality in the marketplace. Thus, investors are sure that the Fed’s purchases of Treasury securities (QE2) will bring on greater inflation and are therefore acting as if it has already happened—but it hasn’t happened and isn’t likely to happen in any significant way for a long time…perhaps a year or more.

 

Still, we see worries expressing themselves in the marketplace. Many interest rates are already edging a bit higher. Applications for purchase money mortgages are already down in the week ending October 8, even though mortgage rates haven’t risen yet. And a refinancing boom has been spawned by the belief that mortgage interest rates are likely to turn higher relatively soon; borrowers are trying to catch the rates before they rise.

 

But aren’t the Fed’s purchases of Treasury securities supposed to keep rates low? Yes, because they increase demand for the securities. But they also cause investors to worry about higher inflation, which pushes rates up.

 

There’s no knowing how long this battle between forces pushing rates higher and lower will last. The only relative certainty is that we are not in the midst of an interest rate crisis. While rates may rise slowly, they probably won’t jump much higher for quite some time. It seems almost as if investors have been waiting so long for something definitive to occur that they’re ready to see the Fed’s coming purchases as more important than they actually are.

 

If QE2 does prove important, it will take many months for it to do so. The economy is bogged down in poor employment data, weak consumer confidence, ragged retail sales and, also important, factories and businesses operating far below their potential. It will take time to turn that around.

 

Once (and if) it is turned around, however, we will probably be worrying about rather than applauding rising inflation. The road ahead is a rocky one, but for the moment, we should see some stimulus at work in the real estate markets, with continuing low mortgage rates and rising buyer interest.