Commentary: It is highly likely thin trading conditions ahead of the Christmas Holiday is far more of factor with respect to the sell-off in the mortgage market today than is the economic news.
The Commerce Department reported earlier this morning that the economy grew at a much slower pace than previously thought in the third quarter. The final estimate of third-quarter Gross Domestic Product showed growth slowed to a 2.2% annualized pace instead of the 2.8% reported last month. Under normal market conditions such news would typically support steady to perhaps fractionally lower mortgage interest rates. Not today. I strongly suspect calmer, cooler heads were quick to note that almost all of the growth in the third-quarter was boosted by government stimulus programs, including the popular cash for clunkers and tax credits for first-time home buyers. Debate will continue to rage over the sustainability of the recovery once government support wanes. The probabilities are high those betting on a robust acceleration of economic growth in the fourth-quarter of 2009 and beyond will likely discover they have been far too optimistic once Uncle Sam begins to turn his financial tap off. The knee-bone to the shin-bone connection here goes like this - slowing economic growth tends to reduce the demand for capital which in-turn tends to push interest rates down - not up.
In other news of the day, the National Association of Realtors said sales of existing homes rose a stronger-than-expected 7.4% last month, to the highest level in more than two years. Lower interest rates, declining property values and homebuyer tax credits are all credited with contributing to the November sales growth. The big question regarding the sustainability of the recovery in the housing sector still swirls around labor market conditions. As long as income growth remains weak and credit remains tight a major sustained rebound for new and existing home sales will be unlikely.
Be patient . be disciplined . and play it by the numbers.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
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About Me
- David Kimmer
- Beaverton, OR, United States
- David is a loan officer for American Pacific Mortgage. He has worked in the lending industry since 2000. Prior to that he invested 19 years in the insurance industry. He enjoys helping people finance the purchase of their dream home.
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