Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – February 26, 2010

4th Quarter GDP Excites

Dissecting The GDP

A ton of economic information to report on, this morning.  First of all, the 4th Quarter Gross Domestic Product grew at a whopping 5.9%. The Best GDP reading in over six years!  You’d think that Stocks would surge and interest rates would move up on the great economic news. However, let’s dissect this figure.  The gains are primarily due to businesses re-stocking their shelves, after the government “Cash for Clunkers” Program and NOT buying during the late 2008 and 2009 seasons, due to the recession.  Also, when you measure consumer spending (the most important component of GDP), we had a measly 1.7% growth.  Not so whopping!

Existing Home Sales

January’s Existing Home Sales were expected to be at 5.5 Million Units.  Unfortunately, the number attained was 5.05 Million.  Inventory of unsold homes moved to 7.8 months.  Weather, back east, probably had a lot to due with this number.  These numbers are not as promising as we’d hoped, and shows that we’re still trying to maneuver out of this slump.

The Chicago Purchasing Managers Index (PMI) and Consumer Sentiment, both came in at expectations.

Where’d All The $ Go?

This last week, the government purchased purchased $11 Billion in Mortgage-Backed Securities.  So, there’s only $44 Billion left, in the Government’s $1.25 Trillion Mortgage-Backed Security Purchase Program.  Wow!  That’s alarming!

Locking Advice

We're Still Floatin'

Poor economic activity reduces demand for capital causing Stocks to lower, which causes Bonds to rise, which, in turn, causes a reduction in interest rates.  If this structure continues, the goods news is that mortgage interest rates would probably move lower.  Unfortunately, the bad news is that this could have a very negative effect on the job market.  Which in turn has a negative effect on the housing market.

Related Must Reads

Advanced GDP Hot! An October Take On GDP
More Jobs – Better Housing
The Effect of $1.25 Trillion…Gone

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This entry was posted on Friday, February 26th, 2010 at 9:16 am and is filed under Chico Home Loans, Home Buying, Interest Rates, Weekly Market Report. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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