Financing Homes in Lake Tahoe and Truckee since 1992.

The Continuing Recovery-Commentary ~ August 2, 2013

Commentary ~ August 2, 2013

 There was a bit of settling in the money and currency markets, with the dollar and oil buying a bit less gold, euros, etc. This is healthy, presumably, since the dollar was rising on world investor fears about their home currencies. Meantime, the 6-month T-bill continued to rest at a 0.07% yield to investors—uninspiring, to say the least, but indicative of the fact that the Fed continues to apply downward pressure to short-term rates. The 10-year T-note moved up a scant 10 basis points.

 In short, all was relatively quiet among the less significant numbers last week, Even the Freddie Mac average mortgage rate rose only 8 basis points, continuing in its narrow range.

 More significantly, perhaps, the number of applications for both purchase money home loans and refinancings dropped 1%-2%, as the mild ups and downs of mortgage rates failed to inspire much activity among refinancers. On the other hand—today’s higher mortgage rates (after the recent spike) apparently continue to dissuade homebuyers from purchasing a home.

 This is mildly troublesome. It’s easy to imagine more potential buyers entering the market in order to secure a mortgage rate in the 4.3% range before rates rise still further. That this is not happening suggests potential buyers are unconvinced that rates will continue their rise. While there’s an obvious rationality to this view—given that rates have already fallen back from their foray into the 4.5% level and the fact that the Fed continues to announce its intention to support low rates—grabbing today’s rates while they’re still available still seems a wise move. The wisdom of investors, though, suggests that we won’t see a strong upward trend for some time.

 This week’s other economic indicators seem to hide their positive nature from those who do not look at them deeply. Pending home sales (signed purchase contracts for residential real estate), for example, were down by 0.4%. This at a time when we are justified in expecting home sales to rise. The National Association of Realtors® blames higher interest rates, as do other industry voices, but we could easily be discussing buyers’ anxiety about rising rates inspiring them to buy and secure today’s rates before they are gone. But we’re not seeing or hearing that.

 Nonetheless, June’s Pending Home Sales data show a 3.3% rise in contracts written up in the West where the market continues to buzz. And the Consumer Confidence Index, is seemingly negative this time with a 1-point decline—but, looking deeper, we see that the “present situation” component of the index rose 5 points. (The Consumer Confidence Index is compiled from Conference Board surveys of three thousand American households attempting to determine consumer views of, among other things, the current state of the economy—or “Present Situation”—and the economy’s rate of growth.)

 All in all, therefore, we see a market whose strength continues to assert itself, though sometimes ambiguously and tentatively.