Financing Homes in Lake Tahoe and Truckee since 1992.

Lake Tahoe Home Loans – November 8, 2013 – Commentary


Commentary-November 8, 2013

Here’s what we’re up against. Some economic indicators seem to reflect, more than anything else, the strength of the economy just prior to the time when the government was shut down. The Index of Leading Indicators, for example, which takes more time to compile than do many other data reports, told us that the economy was quite strong just before the ax fell (see bottom right).

Other indicators suggest, if tentatively, much the same thing. The ISM [Institute of Supply Management] lets us know that manufacturing and non-manufacturing orders were strengthening. Factory orders, too, looked increasingly healthy.

But what has happened?

Purchase money mortgage applications—the loans with which real estate purchases are financed—fell from an additional 2% in the week ending 10/25, dropping by 5% the following week. And a fall-off in pending home sales at the end of the month (noted last week) resulted in a rather grim Pending Home Sales Report. Real estate, which seemed to be one of the healthiest sectors in our economy, is suddenly looking frail.

One instructive aspect of this development is that it suggests the results of the government shut-down in the real estate market may have been more pronounced than many analysts thought at first. Indeed, we might surmise that the uncertainties bred by the problems our government experienced in trying to reach an accord regarding our sovereign debt seem to have infected the real estate market for the moment, causing many potential homebuyers to find a quiet place on the sidelines. Most analysts expect the weakness in the Pending Home Sales Report to show up in a weaker completed sales volume in November and December than in recent months.

Can we find a silver lining here? Yes. We can see indications that the overall economy may have the ability to recovery fairly quickly from the recent financial fiasco. But that’s assuming we don’t fall into more hopeless disagreement as the debt ceiling issue approaches again. Odds are fairly good that we won’t, but the fact that we must talk about odds instead of near-certainties means many consumers will be reluctant to make big financial decisions until we have reason to believe that the future of the economy is likely to be good.

As the Thanksgiving season approaches, we still have much to be grateful for. Here’s to the health and the strength of the marketplace!

Category: Interest Rate