My Financial Healthcheck

The week started with some hope with the 10 Year Bond’s yield dropping from the high of almost 4% to the 3.60% area before finishing the week at the 3.80% area.  So in a nutshell, market rates have been up one day down the next, then up again…not a good trend.  Some believe that the real estate market has hit a bottom..I am not one of them.  Market bulls believe that home prices will bottom this year, where market bears think they could continue to lose value until 2013.   It might be years before any market appreciation occurs with home equity losses approaching $5 trillion. (which is allot of zeros)  In a recent report, May housing starts were up 17.2%, as they say, one month does not make a trend.  Many of the recent sales have come from foreclosed properties, which lower the value of homes in that area.   At he end of the first quarter, one out of eight homes with a mortgage was either late on its monthly mortgage payment or was in the foreclosure process.  The traditional investment home flipper who would buy a distressed home and fix it up and resell for a higher value will be hard pressed to do that in this market. Some think that the large amount of foreclosure homes and recent rise in mortgage rates will bring more buyers into the market, I believe that the higher rates will discourage those same people or prevent them from qualifying for a mortgage.  Home prices are down 32% on average from their peak in 2006, and once they finally hit a real bottom they could remain flat for years.  The future for mortgage rates at this point look scary, due to many concerns about inflation.  Some believe that the Fed needs to start raising interest to combat inflation, others feel the Fed needs to keep rates low to help the economy. I am in the keeping rates low camp, if they go up much further the improving signs in the housing market will hit a wall.  The housing market drives the economy, period.