|For the Week Ending February 9, 2018|
The Markets and the Economy:
Looking at what is happening in the stock market should only be done with an air sickness bag in hand. The volatility that exists is unprecedented. At the start of the great recession back in 2008, the plummeting markets were based upon the housing market crashing. Mortgage defaults were rising and that created a wave of defaults on home loans, which then spread to banks, investors, financial institutions, and the list goes on and on.
What you are seeing this last week with the stock markets diving over 1000 points on Thursday is not based on negative economic conditions in any way. Almost every major economy in the world is strong. There are no issues even remotely comparable to what existed back in 2008. So, then what is the issue causing this mayhem to occur?
Simply stated, it is all about interest rates and herding panic. With the economy doing well, and the Fed raising interest rates, there is a high likelihood that corporate profits will be negatively impacted. Investors, who normally have a concern about stock prices, would take their money from the market and place it into U.S. Treasuries. However, since the treasury market is getting hammered with bond prices climbing and their yields declining, (Bond prices and yields move in opposite directions) investors are selling stocks and moving them into cash. What this in effect does is it makes both the stock market and treasury markets unattractive to place money. As more people pull money from both, the problem gets exaggerated, which then causes more people to pull money, creating a herding effect.
What is happening is purely unjustified panic by investors as it is feeding on itself. The world economy is in great shape and what exists in the markets is panic and fear. It will subside, and the markets will return to normalcy. It always does, and this will be no different. The good news is that the economic fundamentals that exist remain strong and the markets will stabilize once cooler heads begin to prevail.
Applications for mortgage loans on both purchases and refinances remained virtually unchanged for the week ending February 2nd. Based upon the volatility in the stock market and treasury yields, this data would be considered old news. The reality of interest rates rising will become visible in next week’s Mortgage Bankers Association report to be released on Wednesday.
Next week’s potential market moving reports are:
• Wednesday February 14th – MBA Applications, Consumer Price Index, Retail Sales
As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends. I welcome the opportunity to serve you in any way I possibly can.
Please enjoy this quick update on what happened this week in the housing and financial markets.
|Mortgage rates have consistently crept up a little each week through 2018, hitting 4-year highs. Even still, rates are historically low, which may make it
a good time to buy.
|The rising bond yields responsible for higher mortgage rates have also shaken up the stock markets. There is a lot of fear that we may see accelerated inflation.|
|The outlook for 2018 is good for the economy, and the Fed is expected to raise policy rates. It’s likely mortgage rates will increase some more this year.|
|Mortgage applications have been on the rise recently despite higher rates. Applications were up 5% last week compared to the same time last year.|
|Swift price increases and inventory shortages are frustrating renters looking to purchase. Still, 58% of those polled say now is a good time to buy.|
|Robot open houses? Technology at San Francisco-based Zenplace enables agents to show properties remotely. A live agent speaks through a video monitor and
controls the robot’s movements.
A clean desk is a sign of a cluttered desk drawer.
Rate movements and volatility are based on published, aggregate national averages and measured from the previous to the most recent midweek daily reporting period. These
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