A large Spanish bank purchased Guaranty Bank of Texas at the end of last week.  This could be a good sign that global perceptions of the prospects for the US economy, or at least the European outlook, has turned positive since the global sell of early last week.  Sales of Treasuries at auction this week will likely give further indication of direction to the markets.  It is expected that indirect purchasing will remain strong & supportive to the rate markets.  While equities appear to continue their trend of climbing a wall of worry, keep close watch for the potential correction.  It will likely occur when it is least expected in September or October.

 

Existing Home Sales were very good in July, especially in the south where home sales were up 5.6% on an annual basis.  Median home prices are still depressed & continued to fall in most areas.  This is primarily due to the large amounts of Foreclosure & Short Sale properties being sold in the lower end of the price spectrum.  The affordability of these homes is enticing many to enter the housing market. 

 

Nearly 23% of current Florida home owners are reported to be delinquent, so a continued supply of affordable homes in that region is expected for some time.  Nevada holds a close second position to Florida.  Nearly 9% of homeowners are delinquent nationwide & 4.3% are being processed for foreclosure.  Additionally informative about delinquencies & foreclosures in the coming months is the fact that Sub-Prime mortgage delinquencies are decreasing, while Prime mortgage delinquencies are rising.  This may be an indication that banks have worked through the majority of Sub-Prime loan problems, while the next 6 – 12 months may be painful as the unemployment situation puts more Prime households at risk of delinquency & foreclosure.  As a result, opportunities for financially able home buyers in the low to moderate price ranges will abound through the end of the year.

 

 

This Week:  CS Home Price index, GDP, & all the Consumer Confidence & Expenditure reports could move markets.

 

This Economic Commentary is NOT AN INVESTMENT RECOMMENDATION.

 

Richard Stephenson

Residential Mortgage Division

Bank of America