 |
||||||||||||||||||||||||||||||||||||||
March 17, 2009
No, the recession is not over. We ended last week with a statement that it is important for the next major stock market rally not to be accompanied by rising interest rates. We made that statement because in the past two months, rates seemed to go up every time the stock market had a good day. We also wanted to clarify that we were not trying to predict the next stock market rally. However, timing is everything in life. We wrote that column on Friday of last week after the markets closed and sure enough, there was a powerful rally this week. Not a prediction, but perhaps good timing. Regardless, there are two important points that come out of the rally. First, the rally occurred and rates did not go up significantly. So that was good news. We need rates to stay low as a requisite for any semblance of an economic recovery. Second, one week does not constitute a stock market recovery. It will take some time before we can look back and view the last week as a turning point or just a bounce. It is clear that there is money on the sidelines. With real estate and stocks falling out of favor at the same time, not every investor can put their money into gold and bonds. So, when the market perceives stocks and real estate as being cheap, they will react accordingly. We just hope they keep purchasing Treasuries as well.
Current Indices For Adjustable Rate Mortgages
Real estate experts agree that the best hope for avoiding a commercial real estate crisis similar to the residential one is another bailout from the federal government. Last week, Federal Reserve Chair Ben Bernanke suggested at least $1 trillion in credit would be forthcoming in order to avoid a “looming crisis.” Analysts say that while delinquencies are few, office vacancy rates are nearing record levels. This leaves banks holding $1.72 trillion in outstanding commercial loans and many of them are on buildings that are nearly empty. In 2009, $300 billion of these loans are due to be refinanced by commercial banks, but the banks are reluctant to refinance because the properties are dropping in value. Since both insurance companies and pension funds are heavily invested in commercial real estate, they, too, are at risk. “The need is urgent,” says Kenneth Rosen, a professor of real estate at the University of California in Berkeley. “It is important to get this done before we have another problem.” Source: Christian Science Monitor
|
||||||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||
Rates eased lower in the past week. Freddie Mac announced that for the week ending March 12, 30-year fixed rates averaged 5.03%, down from 5.15% the week before. The average for 15-year fixed fell to 4.64%. Adjustables also fell with the average for one-year adjustables decreasing to 4.80% and five-year adjustables falling to 4.99%. A year ago 30-year fixed rates were at 6.13%. "Mortgages followed bond yields amid reports of record continuing jobless claims and a downward revision in economic growth in the fourth quarter of 2008," said Frank Nothaft, Freddie Mac vice president and chief economist. "Real Gross Domestic Product was revised from a 3.8 percent decline to a 6.2 percent drop in the fourth quarter. The housing market continues to slow as well. New home sales fell 10.2 percent in January to the slowest pace since records began in January 1963 while pending existing home sales slowed by 7.7 percent, the weakest since the series began in January 2001." Note: average rates do not include fees and points. Information is provided for indicating trends only and should not be used for comparison purposes. 
