Market Update
July 25th, 2007 Categories: Dublin Real Estate, Livermore Real Estate, Market Update, Pleasanton Real Estate, Weekly Market Updates
Weekly Update
“The housing market has yet to hit bottom,” says Moody’s Economy.com repeatedly. Sadly we are inclined to agree, though we all need to remind ourselves that life does go on—as do real estate sales and purchases and refinancings.
And we’re not just being glib here. The Mortgage Applications Index (below left) continues to hold at strong levels, this week spotlighting the work being done to refinance troubled homeowners into workable mortgage loans. Refi applications were up a solid 4.9% after weeks of declines. News is out today, too, that several eastern states are offering money to help troubled borrowers do the refinancing they need to do.
At the same time, though, the 7.5% decline in the number of permits taken out for new construction does suggest that home-building hasn’t yet reached a bottom, and that is doubtless the result of builders thinking the market for homes hasn’t yet scratched the bottom of the barrel.
The weakness is underscored by the financial markets: We hear today that two of the Bear Stearns hedge funds made up largely of securitized subprime loans are considered nearly worthless at this point. Investor money just doesn’t want to go there—and we can conclude that there is further to fall before a recovery can begin for such investments…and such mortgages.
Later today, we’ll see the report on June’s existing home sales, followed in a couple of days by the report on new home sales in June. Sadly, these will likely reinforce the negative view of the real estate market, which will serve to slow sales even further.
Careful observers of the nation’s economy are easily finding reasons for concern, though the stock market indices seem intent on walking ever higher on the yellow brick road. The long-inverted yield curve, in which short-term interest rates remain slightly higher than longer-term rates, refuses to revert to what most of us consider “normal.” The financial markets are walking a high wire, carefully avoiding the fall that could result from a loss of confidence in hedge funds and debt instruments. And the dollar is lower against foreign currencies than it has been in thirty years. There may be silver linings here (like the possibility that the weaker dollar will help erase long-term international trade imbalances, easing our current account deficit), but it is difficult not to suspect that we’re finding medicinal uses for poison ivy if we assert that this financial poison is good for us. We will indeed get through all of this, but it is all rather unnerving, to say the least.
