Market Update

 

The week started with reaction to the S&P Case Shiller index showing home prices hit new lows. The 10-City Index was Down 0.6% and the 20-City index was down 0.8%. 

Consumer confidence, news about Greece and a bad Jobs Report all contributed to the volatility in Mortgage Bonds. Bonds remain beneath that layer of resistance at $101.31 to $100.81. In fact the bond chart shows prices hit exactly at resistance before reversing.

 

For those of you that are new readers, its important to understand that the Price of Mortgage Bonds dictates Mortgage Rates. When Bond prices rise it pushes down Mortgage Rates and Vice versa.

 

Consumer Confidence Declined in May. The index fell to 60.8 from 66.0 in April.

Stocks sank more than 2 percent Wednesday, following economic reports that confirmed a struggling recovery and after Moody’s downgraded Greece’s bond ratings deeper into junk status.

 

Friday the Labor Department reported that 54,000 Jobs were created in May, well below expectations of 150,000.  The unemployment rate ticked up to 9.1%.

 

 

With matters getting worse in the markets, there are more economists that believe that the U.S. economy is in a depression.  An economic depression is characterized as two years without economic growth.

And if you factor in the $800 Billion thrown at the economy from the failed Stimulus Package, its more like three years of no growth.  What’s amazing is that people have been screaming at our government to stop the spending for about two years now, but they keep wildly spending our money.

 

Nothing, and I mean NOTHING has been done to shore up the Real Estate market and banks are still not lending as much as they should. 

Add to this, the Dodd-Frank Bill that goes into effect July 21st  requiring a 20 percent down payment to buy a home. 

If this goes through it will take 15 years for an African American or Latino to save up enough money to buy a home.  Down payments of less than 20 percent have been around for a very long time and they were not the reason for the credit crisis. Today’s underwriting standards are severely strict when it comes to low down payment loans and therefore the default rates are very low.

 

Back in the beginning of 2008 I talked about a plan that could have put confidence back into the markets by allowing home buyers and home owners to take a tax deduction for a percentage of value lost on their home over a period of five years. 

 

Such a plan would have halted falling real estate prices because the market would have regained confidence as homebuyers would have felt that they were not catching a falling knife. 

Our government has got to admit to itself that what they have done is not working and they have to find a solution. STOP THE SPENDING and CUT TAXES!!!