August 29th, 2011 3:13 PM by Nick Rapplean
This past week’s Big Event theoretically causing investors all over the world to hold their breaths anxiously was the plush Federal Reserve meeting at which Ben Bernanke was expected to make some sort of market-shaking policy announcement. A third version of the quantitative easing program, perhaps. Or more money for banks that finance job-creating businesses. Or something not yet considered.
Silly us. Bernanke convened a meeting to say, in essence, that he still believes in our economy’s ability to revive itself over time. Still believes, in fact, that the second half of this year will produce better growth figures than the relatively miserable figures for the first half. (Not that hard to do, as was underscored by a reduction of wheezing second quarter growth from 1.3% to 1%.)
In other words, Bernanke didn’t say anything significant.
American stock markets, apparently mindful by now that another round of QE is very unlikely to produce any winners, especially over the long term, seemed a bit jubilant there was little to cause investors the all-too-normal share of jitters, and so equity prices rose—hopefully not in hot-air balloons.
Meanwhile, most other numbers your writer watches closely moved very little. The Freddie Mac average rate for its 30-year fixed-rate loans was unchanged. The HSH Associates comprehensive average for fixed-rates, a computation that includes the rates for jumbo loans, moved up one measly basis point.
The number of new applicants for unemployment insurance, meanwhile, rose a few thousand to 417,000 this past week. Teasing us by looking occasionally as if it’s about to cross the 400,000 line for good—apparently, it’s not. It’s just messing with our minds.
Applications for purchase money and refinancing mortgages declined in the week ending August 24—the purchase money loan index down by 5.7%, refis by 1.75%—ending a brief revival of interest in refinancing and an even-briefer rise for purchase money loans. It brings to mind the thirsty desert wanderer who ceaselessly cranks a pump that requires priming…and there is very little water anywhere in sight with which to prime the pump.
For me, one of the most dismaying but least-explained phenomena of recent weeks was the fact that the June Pending Sales Index looked quite optimistic, but the July existing home sales data were very disappointing. The reason, one supposes, that there were few explanations for the disappointing number of closes (relative to applications) is that everyone is still pretty baffled by it. It is difficult to imagine that many loans falling out of the closing process. Potential buyers and refinancers apparently were pulling out of deals, and at the same time, lenders managed to scotch a great many potential mortgage originations.
Whatever weighed heaviest on these numbers, it does not bode well for real estate’s near-term sales figures. And it seems to me to be emblematic of a shift in attitude in our markets. There is less of a willingness to take apparently good news at face value. Cynicism has grown.
Further, and even more important, the belief in the inevitability of the economy’s gradual recovery seems to have faded. We’re not just standing at the lunch counter demanding to know, “Where’s the beef?” We’re worrying out loud about the possibility that there may not be as much beef for many years to come, as the major economies of the world (including ours) sort themselves out.
Still, the American spirit is such that it will look deeply into this problem and most likely find the best ways to profit from it. We haven’t found any yet, though—and we seem further from an enduring set of solutions in the real estate sector than even in most other sectors of the economy. It’s time for some wildly creative thinking.