It was not like we were not warned. They were expected. Yet, the reality of the numbers was quite sobering.
I'm talking about the employment statistics, which for December and the 2008 as a whole were horrific, to say the least. Over 2.5 million jobs were lost in 2008 and the loss in December, alone, was over 500,000. The job losses caused the unemployment rate to shoot up to 7.2 percent.
Here is an interesting perspective. We lost more jobs in the past year than in any year since the end of World War II.
Daunting numbers. But the interesting thing is that the markets barely blinked when these statistics were released. The Dow shed almost 150 points, rates were down slightly and oil prices also fell, but moderately.
How could the markets react so moderately in the face of such important news? Could it be that the bad news has been priced into the markets already? If this is the case, then rates, oil and the stock market are as low as they are going to go for the near term.
Certainly the movements downward were significant during the latter half of 2008. For example, oil prices moved from $140 per barrel mid-year to $40 by the end of the year. That is quite a swing. It would not be surprising to see a period of consolidation where the markets bounce around before the next movement is signaled. The market may be waiting for any glimmer of hope that the worst is behind us and it may be until then that we witness any further fireworks.
Mortgages continued their assault on record lows as they dropped for the 10th week in a row. Freddie Mac announced that for the week ending Jan. 8, 30-year fixed rates averaged 5.01 percent, down from 5.10 percent the week before. The average for 15-year fixed fell to 4.62 percent. Adjustables were mixed with the average for one-year adjustables increasing to 4.95 percent and five-year adjustables falling to 5.49 percent. A year ago 30-year fixed rates were at 5.87 percent.
"Rates for 30-year fixed mortgages fell for the 10th week to a fourth consecutive record low due in part to the Federal Reserve's recent purchases of mortgage-backed securities issued by Freddie Mac, Fannie Mae and Ginnie Mae," said Frank Nothaft, Freddie Mac vice president and chief economist.
"On Nov. 25, 2008, the Federal Reserve announced that it planned to purchase up to $500 billion of these securities by the end of June of this year," he explained. "For the sake of comparison, there were roughly $4.7 trillion of such securities backed by home mortgages available as of Sept. 30, 2008. Since the end of October 2008, these rates have declined by almost 1-1/2 percentage points, or payment savings of about $184 a month for a $200,000 loan."
A study of the Baby Boom generation by AARP and the National Association of Home Builders concluded that because the number of people age 65 and older will grow to 70 million by 2030, where boomers choose to live will have maximum impact on the housing industry.
Elinor Ginzler, senior vice president of AARP, sand that while boomers will reflect the patterns of earlier generations and mostly age in place, "The sheer number of boomers will increase demand for a whole variety of home and community options."
"Key findings from the study include the facts that 79 percent would like to stay in their current homes as long as possible and 50 percent of those who plan to move want a home that is newer than their current home," she was quoted in an article in the Chicago Tribune.
The pace of teardowns also has slowed and preservationists are applauding the trend. About 75,000 homes a year were torn down across the country at the peak of the market. The National Trust has expanded its list of endangered neighborhoods to include 500 neighborhoods in 40 states.
The demolitions have triggered bitter battles between preservationists and suburbanites seeking new homes in mature, urban neighborhoods. But with new housing starts at a 26-year low, teardowns are experiencing a lull. For instance, in Westport, Conn., teardown permits were down 33 percent in 2008 compared to the previous year.
"The idea that you're going to make a lot of money tearing down an old house to build a new one, that's gone," said Morris Davis, a real estate economist at the University of Wisconsin in Madison who has advised the Federal Reserve on the teardown trend.
"We're advising communities to take advantage of this slowdown and use it as a cooling-off period," said Adrian Fine, a regional director for the National Trust for Historic Preservation in Washington. "It gives them a little more time to have a less heated and less controversial discussion to protect a specific neighborhood and balance that with the need for growth and development." (Source: The Christian Science Monitor)
Editor's Note: David Walden is a Certified Mortgage Planning Specialist and Certified Divorce Planning Professional associated with Diversified Capital Funding of Pleasanton.