Financial Markets Await Mortgage, Housing Market Reports
The U.S. stock market proved again last week that it’s still vulnerable to bad news relating to troubled bad credit mortgage lenders, as well as their subsequent impact on the real estate market.
This week, the Kansas City Star reports, should give investors a clearer view of the housing market’s health, and whether it’s stable enough to stave off an overflow of that sector’s troubles into the wider economy.
In addition to new housing market data, investors will be digesting the Federal Reserve’s take on inflation and trying to figure out if the central bank is leaning toward a hike in interest rates - a move that could in turn raise home mortgage rates and put even more of a drag on the market.
Last Tuesday, the Dow Jones dropped more than 240 points when the NYSE said it was moving to delist New Century Financial, Accredited Home Lenders said it was low on cash, and the home loan units of GMAC Mortgage and H&R Block indicated they’re struggling.
The subprime (bad credit mortgage) lending industry isn’t a huge portion of the U.S. economy, but some market sages, including former Fed Chairman Alan Greenspan, are saying troubles could escalate and spill into other sectors if home prices drop and make mortgage refinancing impossible.
- The markets will find out Friday if homes lost value in February, when the National Association of Realtors reports last month’s median home prices.
- January’s report - which came out February 27, when the Dow plummeted more than 400 points - showed that median prices fell for the sixth straight month.
- The data will also include existing home sales and inventory; economists are expecting February sales to slip to 6.35 million from 6.46 million in January.
Investors this week should also get a better idea of how the sluggish housing market is affecting the industries that depend on it.
On Monday, the National Association of Home Builders will release its index on builders’ perceptions of sales of new single-family homes and near-term sales prospects. Tuesday, the Commerce Department reports on February housing starts and building permits.
Also on Tuesday, Fed policy makers begin their two-day meeting to discuss whether to adjust short-term interest rates - probably the biggest factor in determining the future outcome of mortgage loan costs.
Market forecasters believe the U.S. central bank will leave rates unchanged for the sixth consecutive time (after 17 consecutive hikes), but the statement it releases Wednesday could provide some insight into whether it sees rising inflation as a bigger threat than the flagging economy.
Disappointing news related to the housing market or bad credit mortgage lenders, as well as a harsh warning from the Fed or signs of weakness in overseas markets, could convince Wall Street that the market’s downturn isn’t over yet.
Also Friday, one of the biggest U.S. mortgage lenders, Freddie Mac, will be posting its fiscal fourth-quarter earnings: $1.33 a share. It closed at $59.52 Friday, at the lower end of its 52-week range of $55.64-71.92.
SOURCE: Kansas City Star