Mortgage rates remain at near eight month lows as strong demand in the bond market drove the yield on the ten year Treasury note below 3.20% before rising slightly to 3.25% today on a renewed rally in stocks. The rate on the benchmark thirty-year is hovering right at 5% with no points and the fifteen-year stands at 4.375. Thirty-year rates actually were pushing 6% back in the spring so this is quite an improvement and rather unexpected. The general consensus has been that as the economy pulls out of recession and as signs of economic growth become more evident, rates would rise as inflationary pressures mounted but this has not materialized. As lingering fears over the shape of the US and world economies has driven the price of gold to a record $1,039 and ounce today, the dollar is flatlining and you are beginning to hear comments like "irrational exuberance" when describing the run up in stock prices this year. And there are other worrisome signs. Last week's unemployment report came in well below expectations as the overall rate of unemployment rose to 9.8%. Consumer confidence also fell unexpectedly last month and retailers are now forecasting a dismal hoilday shopping season ahead. Though I feel the overall economy is in a hugely better position than this time last year, I still say something has to give and I think that something is an invetibale correction stocks.
At least there is continued good news coming from the housing sector. Last Thursday the National Association of Realtors reported that homenuyers wrote more contracts to purchase homes than in any month this year. The August Pending Home Sale Index rose a whopping 6.4% and mared the seventh consecutive month of increases in the index. The August increase was well above economist's forecasts who had expected a modest rise of 1%. In contrast, July pending home sales rose 3.2%. Perhaps even better news for the hosuing market cam last Friday when the S&P Case-Shiller Home Price Index was released for July and showed that home pices in twenty cities across the US were up 1.6%. This was the third month in a row that the index has shown prices rising. The June index showed an increase of 1.4%. Even though July 2009 prices were still 13.3% below July 2008, the increase was still a pleasant surprise to analysts who site the data as evidence of a trend towards a stabilizing housing market.
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