Stop Reading and Go Vote!
If you haven’t already voted yet: take one last peek at what your vote will mean to your mortgage market, shut the lid on your laptop, head to the polls, do your civic duty, and then get your free coffee!
Consumer Credit Crunch
Banks are going to turn us into a savings economy after all. Tightening would have been a lot more valuable done over time rather than an overnight choke hold. However, a good short-term belt tightening never hurt anyone in the long-run. It also shows you flushing in liquidity does not necessarily unclench the tightening fist of credit–only confidence in the future markets does.
In its quarterly survey of loan officers, the US central bank said 85 per cent of banks – compared to 60 per cent in the three months to July – had tightened standards on commercial and industrial loans to large and medium-sized clients.
Consumer credit also tightened to the lowest levels since the early 1980s – although one small positive sign came with the fact that the proportion of banks tightening standards for residential mortgage loans fell from 75 per cent in July to 70 per cent in October.
Auto Sales Sink
It is amazing how swift consumers have change behaviors in the face of economic crisis.
Sales of light vehicles in the US sank to their lowest level in a quarter of a century last month, with generous discounts failing to offset evaporating consumer confidence and scarce credit.
Tightening credit may have been the banks’ reaction, but it is amazing to me how consumers collectively dumped their demand off the cliff. It seems this is a theme to watch, because it is not historical and it is playing havoc with traditional market levers–ask OPEC.
Crude oil futures were little changed before a report that may show accumulating stockpiles of crude in the U.S., where manufacturing shrank at the fastest pace in 26 years last month.
U.S. crude oil inventories probably rose for a sixth week because of declining demand, according to a Bloomberg survey before tomorrow’s Energy Department report. Credit Suisse Group AG, Switzerland’s second-biggest bank, cut its 2009 price forecast to $58 a barrel from $73 on prospects of weak demand in China.
Consumers Stop Spending
Backstopping my last comment on consumer demand. However, tying this to mortgages–this is the trend that is most likely to lower mortgage rates and recover the market. This behavior will begin consumers accumulating cash, repairing credit, and bottling up demand.
“Our retail and manufacturing clients are seeing almost an aversion to consumption,” says Todd Lavieri, chief executive of Archstone Consulting, which tracks retail spending patterns. “In previous downturns [such as in 1991 and 2001], we have often seen shopping as therapy.” Now, with credit conditions so tight, Mr. Lavieri says, “people aren’t shopping to feel better. They actually are not shopping to feel better.”
Go Vote!
Okay you have read the whole thing. No excuse–go vote!
Presidential Poll/Survey
Who do you think will do the most to help the mortgage market and why?
(photo credit: Hilyin)
About Bill Rice