Produced by NAR Research Indicator This Week Last Week GDP 2010 Q3: 2.0% 2. 3% ↓ GDP 2010 Q4: 2.5% 2.6% ↓ GDP 2011 Q1: 2.3% 2.3% ↔ Unemployment rate by the year-end 2010: 10% 10% ↔ Average 30-year fixed mortgage rate by the year-end 2010: 4.7% 5.0% ↓
An indicator of economic activity the Chicago Fed activity, the National Activity Index moved up to zero in July, from ‐0.70 in June. An index value of zero points to national economic growth along historical trend rates; a negative value indicates growth rates that are below‐average, while a positive value denotes above‐average growth.
The 10‐year Treasury rate declined in August and continues to be at historic lows. As of August 20, the rate was 2.62 percent. In July of this year the rate was 3.50 percent, while a year ago the rate was 3.62.
The low rate bodes well for the cost of borrowing in other financial markets, and points to continued low mortgage rates.
Mortgage purchase applications were up 0.6 percent for the week ending August 20 th , continuing the weakness in the home buying market seen post-tax credit. The level of mortgage activity remains near 13-year lows. However, purchase applications do not take into consideration all-cash purchases which according to the June REALTORS® Confidence Index made up roughly one-fourth of transactions.
Year-over-year purchase applications were down 39.2 percent. The weak job market continues to weigh heavily on the housing market.
Refinances made up 82.4 percent of mortgage activity increasing 5.7 percent as mortgage rates fell to the lowest level in 20 years of the survey’s data. The average rate for a 30-year fixed mortgage was 4.55 percent.
According to the Mortgage Bankers Association, the seasonally adjusted percentage of loans that began the foreclosure process in the second quarter 2010, nationally, remained unchanged from the previous quarter at 1.17%. However, the second quarter rate is 30 bps below the 2009 rate of 1.47%.
The west exhibited the biggest year-over-year decrease in foreclosure starts. In the second quarter 2009, 1.78% of all loans began the foreclosure process. In the second quarter 2010, 1.27% of all loans began the foreclosure process. This represents a 51 bps decline.
Overall, there are two countervailing forces at work. Unemployment levels, although lower than the previous week’s level, still remain higher than they were in June. The lack of more robust job creation has hindered consumer confidence and housing demand. In contrast, foreclosure rates have declined from their peak levels in 2009, thereby decreasing the amount of housing inventory put back on the market.
Fore more, visit the Mortgage Bankers Association website .
The Commerce Department revised the second quarter growth down. Gross domestic product, the value of all goods and services produced from April to June, rose 1.6 percent annualized, which is down from the initial 2.4 percent estimate.
The downward revision was mostly due to much higher imports and a smaller gain in business inventories. On the other hand, there was some improvement in residential fixed investment, an increase in nonresidential fixed investment, an improvement in state and local government spending, and an increase in federal government spending. In terms of inflation, the GDP price index was pushed up to 1.9 percent from the initial 1.8.
On a positive note, personal consumption was strong and increased 2.0 percent in the second quarter, compared with an increase of 1.9 percent in the first.
However, according to the University of Michigan’s consumer sentiment index, also released today, confidence among consumers increased only slightly in August to 68.9 from 67.8 in July which was the lowest index since November. The weak consumer confidence may raise a risk of decline in consumer spending which accounts for about 70 percent of the GDP.