March 30 post, delayed
The rally in the stock market has been encouraging to economy watchers but the debate is on as to whether this is a bear-market rally or merely a “dead-cat bounce”. This morning the stock market is off 200 points again as stock buyers are catching their collective breath. Interesting that no one seems to be calling this a recovery yet but at best a bear-market rally. I appreciate that conservatism of thought as it will take a solid economic base to truly signal recovery on the way. And yes, we can expect stocks to be the advance leading indicator, but this is still too early.
The impact of stock movement on mortgage interest rates has been minimal. MBS continue to trade at levels supporting the sub 5.0% interest rates we have been looking for. An element helping that trend was the report of Personal Consumption Expenditure, the Fed’s favorite inflation indicator. It came through late last week with an annual number at a very tame 1.8%. Wage numbers came through up 0.2% which is good for the economy and not hot enough to be an inflation scare. The damper on the economy was the improving savings rate. For the first time in over a decade the savings rate has had 2 consecutive months of 4.0%+ numbers. This is wise on part of insecure consumers, but keeps spending and recovery capital constrained. Compare this to the average savings rate for 2005-2007 seen in the chart below of under 0.5% for a 3 year period. It will be tricky to get a normalized spending-led recovery and maintain some reasonable level of household savings. Watch the savings rate to get a feel for the length of the recession, the higher that rate the longer the duration of the downturn.
Today’s announcement from Washington on demands placed on the automakers including the ouster of the 8-year CEO of GM is surprising only in one aspect. This is not unusual at all for active boards of directors to step up and kick some executive posteriors in bringing positive change to their investments. What IS unusual is that Washington DC, the White House is a significant part of that Board making the demands. Let’s hope for success there.
A quick highlight of Signet’s available lending shows that individual home purchasers have great loan tools at their hand. Loan rates are as low as they’ve been in our lifetimes. Qualified borrowers are being approved for exceptional loan programs. Signet is happy to work with your investor clients as well. Rates for reasonably leveraged investment properties can be as low as principal residence rates, below 5.0% with some additional points paid upfront. And at these rates, investment properties are penciling at levels not seen in our area in the past 5 years. We’ll give you, your friends and family the service and professional advice they deserve. Never hesitate to recommend the best to your clients. We have brought on additional processing support to give the same exceptional service level to all of your needs and opportunities. Welcome aboard Claudine!
Call 541 318 0888 or email anytime and make it a great week! - Dave
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