The more everyone agrees that we are in the middle of an economic crisis–myself among them–the more it occurs to the Contrarian within that the economic tide may already be turning. Not quickly, mind you–but it’s difficult to imagine the whole world agreeing about any aspect of the economy until the economic stage in question has already started to pass. That, after all, is what fuels the late phase of a market boom, when novice investors run out and buy up every condo for sale in Florida, but do so too late.
In any case, the situation is still very dangerous, especially for the million or so homeowners whose mortgages may soon go into default and for the investment funds that are teetering on the edge of total loss of value. Indeed, even if we’re just now seeing the earliest beginnings of recovery, we’re likely to experience big bumps in the road to a smoothly running real estate and mortgage market.
Hold on, therefore. But join me in watching for the earliest whiffs of recovery. It may take six months, or maybe a year, for these signs to multiply and start defining the market, but we will sleep better at night if we know they’re on the way.
Regarding Loans at Chase it is business as normal: We continue to make jumbo mortgages and we continue to offer many stated income loan products.
30-yr Fixed-rate Mortgage 6.97%15-yr Fixed-rate Mortgage 6.63%1-yr ARM 6.33%[HSH average rates: 30-yr unchanged, 15-yr up 1 bp; ARM up 19 bps]Weekly Commentary Thumbnail Sketch: Industry experts have predicted that we would see the first signs of recovery in the new home market, largely because builders have more ways of controlling inventory than do individual homeowners. If this is the case, we may be seeing the first glimmering of improvement. The number of new home sales increased by 2.8% in July, according to the data. These are newly-signed contracts, not closed sales, so the figures tell us more about present market conditions than do the Existing Home Sales figures. The reporting on the Existing Home Sales, by the way, provides a classic glimpse at bias and spin in journalism. One newspaper declared that the number of existing home sales fell to the lowest level in a decade. Another said existing home sales had edged down only slightly further from the prior month and were clearly not in a free fall. I like the latter view, of course—not only because it is more reasonable, but also because it better reflects the reality of the market we’ve been watching. Money is gradually becoming available for lending again; lenders are loaning that money; deals are being written. The market MAY be settling down a bit. But don’t count on a smooth ride from here forward. There may be several shocks to the markets in the coming months. Bond market guru Bill Gross of PINCI Bonds (among others, like Jim Cramer) has called for the federal government to step in and bail out the hundreds of thousands—if not millions—of homeowners who could be badly hurt by this credit crunch. He points out that the government bailed out Chrysler and failing S&Ls in the past, among other problem corporations; why not create a program that helps refinance the failing loans of so many Americans? London’s newsweekly, The Economist, answers this question by saying we mustn’t give people a free ride in this crisis. The credit crunch is forcing a repricing of risk that needs to take place. The Economist says, “Don’t mess with it.” Washington, D.C., meanwhile, has taken up the issue, with Congress holding hearings to determine to what extent it should intervene in this economic crisis, and the President has quietly charged the Treasury with the task of finding ways to ease the pain for homeowners. If all of this weren’t full of risk for the economy and the real estate market, it would be utterly fascinating to watch—history in the making. But it is full of risk…and still, it’s fascinating, indeed. Stay tuned!