Volatile trade ahead of Fed Chairman Bernanke’s Congressional testimony led to large losses into the final hour. The latest MBA Mortgage Activity Index increased to 753.5 as purchase apps snapped a lengthy losing streak, gaining 3.4% while refi activity hit a 14-month high after increasing 8.6%. The 30-year contract rate fell to 4.6% a new record low.
Tomorrow is a big day for real estate with the release of the June existing Home Sales report, expectations call for a substantial drop. This will be the first month to really show the effects of the expiring Federal Tax Credit as escrow usually takes about 60-days. Month’s supply should also jump and estimates run from 9 to 10 months in total. Adding the distressed sales ratio and the downward pressure on real estate prices remains significant and will do so for quite some time yet, fundamental market data that absolutely should not be overlooked if you’re considering purchasing real estate either as a residence or as an investor.
Further the risks of a downside surprise in the data remain great. The WSJ quarterly study of housing market conditions shows that inventory is growing in most markets. This is just one of many recent anecdotal reports suggesting a downside surprise in the data.
With the HAMP and related mortgage modification programs clear failures the recently ended state and federal tax credits can also be added to the list of failed attempts to correct the substantial imbalances in real estate. Imbalances driven by prices that are two high, requiring a mortgage unsustainable for your average working American, an excessive level of existing consumer debt and of course high levels of unemployment and underemployment combined with falling wages. All of which is classic deflationary credit bust.
On the subject of employment a recent study by the CEPR finds that in order to return employment levels to the 2007 high. Even if the economy adds jobs at the rate seen during the fastest 4-years of the early 2000 expansion it will take until 2014, adjusting for population growth and the date jumps to a disheartening 2021. A stark illustration of the need to start an economic revolution based on our greatest strength, which is innovation, as the status quo is clearly broken, because it seems to me that the only thing large enough to do the trick at present revolves around alternative energy and related green programs that feature sustainability.
Hi and welcome to The Profit Motive, I’m your host Caleb Lawrence. Once upon a time in America the media acted as the watchdog of the corporations and the state. In the modern era it’s all about ratings and profits, opinion has been substituted for news and frequently is presented as fact. 
