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Mortgage
Watch |
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| Are
Big Banks Bad? Part 4:
The Sorry State of Mortgage Lending March 10, 2010 |
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| Are
Big Banks Bad? Part 3:
Negative Amortization Loans February 25, 2010 Top of page |
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| Are
Big Banks Bad? Part 2:
Banks' Role in the Sub-prime Crisis February 17, 2010 Top of page |
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| Are
Big Banks Bad? Part 1 February 10, 2010 Top of page |
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| Happy
Holidays and Joyous New Year January 1, 2010 Top of page |
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| Are
Home Sales Good or Are We Just Holding Our Breath? December 24, 2009 Top of page |
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Letters
From Dubai
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Option
Arms Leave Homeowners Few Choices
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| Free
Candy, Free Ice Cream, Free Money November 12, 2009 Top of page |
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Extend and Pretend
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Mortgage and Financial Markets Swing Wildly This Week. It appears that stocks and bonds are going to continue their broad swings for the foreseeable future. All the volatility indexes have gone up over the past several weeks indicating that we're going to see more of these broad swings in both the stock and the bond markets. The reason for this is that we continue to have varying opinions among investors, economists, and analysts about where our economy is headed. From what I see pretty much 50% think
things are headed up and 50% down. The leading economic indicators are
the same way. In terms of housing, we have some good news in the real estate markets, and that is that the entry level markets are on fire. Very, very hard for individuals to even get their purchase offer accepted in the entry level arena because there is so much buyer demand. In San Diego, we see houses below $400,000 that have multiple offers, and the same is true all through California’s urban areas and through most of the West and in the Midwest as well. That’s good news, but it's important to note that 1/3 of all home sales are REO's. REO means “Real Estate Owned”, owned by banks and investors, including Fannie Mae and Freddie Mac. There is also a huge supply of “shadow” inventory, which are homes that have been foreclosed upon and that are sitting and waiting for the banks to put them back on the market. And with unemployment poised to rise further it’s hard to know where the continued buyer demand will come from. So, we see again that half the indicators are good and half are bad. I think in other markets as well we see the same kinds of conflicting patterns going on. It appears that many investors have fled the stock market and are putting their money into gold and the bond markets. I believe the mid-term trend is for the stock market to have a second dip and to go back down to perhaps the 7,500 level and for interest rates to ease down a little more to where they were earlier this year. One of the reasons is the job market. We still have soaring unemployment rates and even though many people are speaking about a jobless recovery, there's never been such a thing. It’s going to be hard to have a recovery that's based on speculation over certain stocks going up. We saw that yesterday with Warren Buffet’s purchase of Burlington Northern Railroad. A lot of the economic growth that we seen, probably 2/3 of it, is due to government stimulation of the economy, which is necessary and critical to our financial health and recovery. At some point though that will have to be taken away. I do not believe that most sectors/industries, or the financial markets will be able to stand on their own for the next few years. Therefore, I think the mid-term trend is for the stock market to have a second dip and correct down a couple of thousand points and for interest rates to remain low and perhaps go down another 0.25% in rate. We’ll know more when the current Federal Reserve meeting ends on Wednesday and we hear what their forecast is for all this.
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