Yesterday's market dominated by "double dip" recession fears; Today's data suggests things MAY not be that bad - Rate Lock Report for July 7th, 2010
If you're unhappy with the pricing improvements we received yesterday, please raise your hand. Anyone? I didn't think so. Would you like to know why it happened?
Yesterday, markets were gripped with panic over the possibility of a "double dip" recession, that is, a second, possibly worse, recession following the first. Needless to say, this is a pretty scary possibility, and one that the talking heads on CNBC apparently couldn't say enough yesterday. (I didn't actually watch, as the best thing CNBC usually has going is the ticker on the bottom, but that's what I heard.)
Now, obviously, a double dip recession would be a very bad thing right now, because our government has already spent its way into a big hole trying to dig out of this recession. Do we really expect them to repeat all of that spending to dig out of another recession? Are they even capable of that? A lot of very smart people are worried about this very possibility.
Fortunately, we got some better news from less commonly cited sources today, suggesting that things might not be all that bad. The first piece of data needs to be taken with a grain of salt. The American Bankers Association reported that credit card delinquencies, that is, 30-day late payments on credit cards, fell to their lowest level in 8 years this month, with fewer than 4% of credit card holders 30 days or more past due. This is good news for the banks, yes, but keep in mind what has happened in the last two or three years - banks have been taking credit cards away from consumers it perceived as riskier left and right. I know very few people who haven't had a credit card shut off or a credit line reduced, and it may be that this is a bigger cause of the reduced delinquencies. It also bears mentioning that this report covers only the 1st quarter of 2010, a period during which we already know the US economy was in better shape.
The second piece of information to arrive today was a report from the OECD raising the possibility that unemployment may have peaked for developed economies. The Organization for Economic Co-operation and Development is a non-governmental organization based in Paris that seeks to foster sharing of knowledge and solutions to common economic problems throughout its membership, which includes most of North America, Europe, and a few other scattered countries. In its report, the OECD states that 17 million jobs have been lost among its member countries during the recent crisis, 10 million of those in the US alone, and it suggests that governments striving to trim budget deficits must be careful to avoid making unemployment worse through their cuts. It does state that it feels that the level of unemployment may have leveled off, and could move lower if governments foster the right environment.
Markets have opened higher on the day, and appear to be holding that level at present. Still, mortgage pricing moved significantly yesterday to the point where there is little chance of further improvement in the immediate future. At this time, you may want to consider locking especially on loans closing in the next 2-3 weeks. It is more likely at this point that we will see a reversal in that time, rather than continued improvement.
There is little more economic news due this week, so the stock market will be a major driver of mortgage pricing. Tomorrow's unemployment claims report is the last piece of significant data for the week. If you have questions regarding Rhode Island Refinance Rates, or whether or not to lock your loan, please don't hesitate to contact me by cell at (401) 263-8655, or by commenting on this post. Have a great day!
Dan Hartman is a Senior Mortgage Advisor with Province Mortgage Associates, and serves as an Adjunct Professor of Finance and Economics at Roger Williams University and the University of New Haven. He has been helping homeowners and homebuyers with their mortgage questions for over 10 years.