Florida Mortgage Blog

Mixed Signals from Fed Chairman Bernanke

September 15th, 2009 8:29 PM by Preston Ware

Mixed Signals about the Economy Continue

Federal Reserve Chairman Bernanke said today that the recession “Is very likely over” but job losses will continue to rise. Isn’t that like saying, I am in better shape now but I am still getting fatter? Of all the statistics that we hear about there are a few that hit home more than others. For me, being a mortgage broker, the interest rate is still the most important number in my life. Right now, we are enjoying low interest rates very similar to May of this year when we had a nice little refinance boom going on. Mortgage interest rates are low but banks are not backed up and applications levels are flat. That is surprising because purchase units are up and we are in the home stretch for the $8000 First Time Homebuyer Tax Credit that expires On December 1, 2009.

 

What is the key statistic that affects you the most? (Unemployment? Spending?)

 Last week was the first week in a long time when my mortgage rate lock advisory gave me the float signal in both the short term and the long term time frame. Usually bad economic news for the markets improves my rates. Most of the indicators we are seeing are positive and/or exceeding expectations yet nothing has triggered mortgage interest rates to spike up. Does this mean that in spite of a few bright spots we all generally believe things will turn for the worse?

 

How do we look upon the spike in retail spending? Most of it was due to the cash for clunkers program. Car dealers had record months. Everybody bought their new car and traded in the clunker. The car salesman has some money in his or her pocket for a while. This is certainly a positive for the guys at the dealer and also the environment but what happens in 6 months? There is a perception of prosperity here for a moment but then everybody goes back to saving and being nervous about paying their mortgage and their car loan. It will be interesting to see how many of those loans default and customers are stuck with no car.

 

The balancing act continues. Earlier this week, Asian markets were lower amid concerns about US and China squabbling about trade disagreements. Obama put a tariff on Chinese made tires and China claims that we are dumping chicken. This doesn’t sound like too much trouble but any friction between our two countries makes the whole world nervous. Tires and chicken doesn’t exactly hit home with me but still enough news story and effect world markets.

           

On Wednesday information will be released on the consumer price index and industrial production data. Thursday housing starts. Being from Florida and witnessing the frenzy and then the crash, housing starts is one statistic that I can identify with. The trickle down theory when it comes to jobs is greatly affected by new home construction. Every phase of the building process means work for one set of contractors or another. Also consumer confidence about the long term strength of the economy is measured by borrowers willing to go into that 9 month struggle to build the new home the way they want it, ironing out all of the details with the builder.

 

I recall when I built my home, a good friend of mine said, “How’s your marriage?” Nowadays the saying might be, “How’s the economy?” “Where will my job be in 9 months?” Housing starts takes into account a longer view of forecasts instead of the month to month fluctuations of these other indexes that don’t really mean anything to the average American. Getting back to hard hit Florida where there is a larger percentage of self employed people, this number means a lot. Also implications on my favorite number, mortgage interest rates. Can’t wait for Thursday!

 

Written by Preston Ware
First South Mortgage
Tel: 704-542-8057
* http://www.prestonware.com
Email is preston@prestonware.com.

Posted in:General
Posted by Preston Ware on September 15th, 2009 8:29 PM

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