Did the stock market mis-calculate the economic rebound?

 

Zillow.com is reporting that almost 25% of all mortgagors owe more money on their mortgage than their home is worth and that figure may increase to 30% by mid 2010.  

 

 

 

 

Home values dipped in the second quarter from a year earlier in almost 90% of the 161 U.S. metropolitan areas surveyed by Zillow. 23% of mortgage holders were underwater at the end of June, Zillow said.  In June, foreclosures accounted for 22% of total U.S. home sales, and 29% of homes sold were purchased for less than what the owner originally paid, according to Zillow. 

 

Is this the the stock market retracement everyone has been expecting?

The indexes are weaker again this morning. If equities are entering a reversal and profit-taking period interest rates will head back lower. Can't be sure of the timing but the stock market is way out in front of reality. However equity markets on rallies generally anticipate economic improvement six months to one year in the future.

Analysts are concerned because unemployment is continuing to increase, consumers have shut down (June consumer credit last Friday fell $10.1B, 2.5 times weaker than expected) and home prices are still declining in many areas. 

HUD just announced that starting this week the FHA will refinance troubled mortgages by reducing up to 30% of the principal under the Home Affordable Modification Program.

The FOMC begins its two day meeting this morning. Analysts do not expect changes in interest rates. The Fed has been forecasting a bottom in this quarter and a slow economic improvement.  The stock market will be listening carefully to Mr. Ben Bernanke's comments. 

Watch Bob Prechter video by clicking here

If you are waiting to lock your interest rate keep a watchful eye!

 

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