The Mortgage Minute: A Cycle For All SeasonsMichael SimonHousing Market, Forecasts, Economy, Market Composite Index, Federal Reserve,
Heading into November, it appeared as though the housing market
was caught in a downdraft, perhaps finally becoming affected by the
sluggish economy. Of course, September finished strong, and October
began even stronger-so strong in fact that applications reached a
record high for the week ending Oct. 4. But then, the Market
Composite Index (a measure of mortgage loan applications for both
purchases and refinances) began to dip-gradually at first, but
eventually plummeting by more than 30 percent until a modest
rebound late in the month.
Then on Nov. 6, the Federal Reserve cut
short-term interest rates by 0.5 percent for the first time in
nearly a year, which had little or no effect on the housing market
(mortgage applications actually decreased by four percent for the
week ending Nov. 8). And, to cap autumn's fall, Alan Greenspan
spoke on Nov. 13, this time saying, "Although economic growth was
relatively well-maintained over the last year, several forces have
continued to weight on the economy. Over the past few months, these
forces have taken their toll on activity, and evidence has
accumulated that the economy has hit a soft patch."
By the day's end, stocks had risen and fallen, Saddam Hussein
had accepted the United Nations' resolution, oil prices had
dropped, the Roman Catholic Church's bishops had adopted strict
revisions to their sex abuse policy, and everything was pretty much
back the way it was when the opening bell rang.
It's anyone's guess as to how refinancing, which has long been
the housing market's primary fuel, will hold up, and whether
records will continue to be broken as steadily as they have been.
Will the housing market be able to maintain its super-human
strength and keep the economy buoyant? Will consumer spending
continue to surpass confidence as we enter the holiday shopping
season? Will refinancing checks and Republican tax refunds continue
to roll in?
With a simple, anti-climactic, yet not-discouraging speech about
soft spots, Greenspan has created a veritable interest void, as the
world waits on the Iraq situation and Republicans revel into their
congressional domination. Never has a 0.5-percent rate cut meant so
little. My guess? Dust off your black book and start making phone