PALM CITYS HORSE TALK: OUR WEEKLY REVIEW ON OUR ECONOMY

OVERVIEW ~ for April 12 through April 16, 2010 The Dow Jones Industrial Average (DJIA) climbed quietly and unobtrusively higher, generally in 0.1% increments, until Friday, when a Securities and Exchange Commission (SEC) charge unsettled the market’s forward movement and sent the markets running for safe havens. Consequently the DJIA lost nearly 126 points, though managing to remain above 11,000, and the 10-year Treasury fell back to 3.774% (having begun the week at 3.890%).

FOCUS ~ It was a good week, in many respects, for the real estate market and the overall economy. Federal Reserve Board chairman Bernanke reiterated the Fed’s commitment to keep short-term interest rates low for some time to come. Though he expressed caution about the recovery, Mr. Bernanke suggested there are few worries about inflation as of yet. The stock markets rose on these words, while Treasury security yields edged higher.



The National Association of Home Builders monthly survey of builder outlooks rose from 15 to 19, indicating a jump in optimism about sales of new homes in the near-term future. And the number of new residential properties whose construction began in March exceeded the number in February by a strong 1.6%.



And in the broader economy, March retail sales were 1.6% higher than those of February (and 7.6% higher than in March, 2009). As a result, analysts felt that consumers were more open to big-ticket purchases than in the recent past. However, though auto sales may have risen, home sales have not, nor have applications for mortgages.



With these economic weathervanes pointing in the right direction, then, and with the imminent expiration of the $8,000 and $6,500 federal homebuyer tax credit, one would have expected the Mortgage Applications Index (see to right) to improve as well. But it hasn’t. Most significantly, the number of applications for new purchase money home loans actually declined in the week ending April 9 by 10.5%.



An upward spike in mortgage applications, of course, would signify that more homes are under contract for purchase, of course. (A homebuyer’s purchase contract has to be signed by April 30 if the purchase is to qualify for the tax credit.) Surely there is a tipping point, where the good news in the economy motivates homebuyers to act. Not even the end of the homebuyer tax credit is creating that tipping point right now, though. Hopefully, a firming recovery will soon lead to increased home sales, though this economy offers no guarante.