First-time homebuyer data fell 16.6 percent, including consumers looking to refinance. The Mortgage Bankers Association’s seasonally adjusted index of mortgage applications fell to the lowest levels since 2000.
New home buyers have been steered away from buying new homes because tight credit and higher qualifications, including higher down payments, are required to buy a home. Job insecurity was another important factor, as it can increase up to five years.
Many people stay away from buying a home because prices may still drop or they can’t get a mortgage. The Mortgage Bankers Association’s index of purchase requests fell 10.9 percent to 279.3 in the week ending Oct. 17, while its refinancing requests fell 23.5 percent to 1,158.8.
A recession appears on the way as rising unemployment and declining spending still persist. Due to housing access to the market, residential properties will decrease in the coming 2009 and foreclosures will increase.
Stocks, on the other hand, continue to find a bottom as investors received news of third quarter results that were mostly grim. Investors are worried about the duration of the earnings slide and whether it will persist into the next quarter.
Credit markets are beginning to show signs of improvement as bank-to-bank lending rates have fallen sharply, indicating that credit is becoming easier to obtain. The London interbank offered rate, or Libor, on three-month loans fell to 3.54 percent from 3.83 percent.
The fear of a global recession may be just around the corner. Treasury Secretary Henry Paulson said difficult months ahead.
The world leader will meet in Washington on November 15 to discuss the financial meltdown as many US companies are feeling the pinch. Merck & Co. said it will cut 7,200 jobs, while Yahoo is cutting 1,500 jobs.
One week after Paulson announced a $250 billion bailout package to help American banks, a new $540 billion plan led by JPMorgan Chase & Co. to buy certificates of deposit, bank notes and commercial paper of mutual funds. The new program called the Money Market Investor Funding Facility is designed to revive the market for commercial paper, short-term loans that are critical to keeping businesses running.
The Fed has already announced that starting next Monday it will begin to make direct purchases of commercial paper.
Democrats are pushing to put together another economic plan that could total $150 billion or more. The White House has to back the idea, but President Bush is willing to consider a stimulus measure.
Earnings season will be tough for investors. Many analysts predict the recession will last a few years as slowing economic growth, credit markets and housing will follow the economy.