Last week on Monday, the Dow ended October with a 9.5 percent gain. By Tuesday, gains had been cut by over a quarter. Stocks dropped 2.5 percent on November 1, prompted by Greece’s Prime Minister George Papandreou’s proposal to put the debt deal to a public referendum. Since then, Papandreou has backed down on this proposal, narrowly survived a parliamentary vote of confidence, and recently agreed to resign and help create a transitional administration before early elections can determine a new government. Now the markets have turned attention to concern over Italian debt. All of this illustrates that the markets remain shaky and will continue to do so as long as we have uncertainty over the global economy. We continue to have windows of temporary optimism, but the whole picture remains uncertain.
On the home front, the private sector added 104,000 jobs in October, which marks the third month in a row of positive numbers. The 104,000 private sector growth was offset by a loss of 24,000 government jobs. The positive month knocked the national unemployment rate down one-tenth of a percentage point to 9.0 percent. Economists agree that a healthy rate of growth would be 150,000 a month, which would keep pace with new entrants into the job market. Locally, unemployment fell to 9.5 percent in September (from 9.6 percent in August).
Interest rates have followed the peaks and valleys of the market. The sharp drop on November 1 corresponded with better rates than we had seen in a week. To begin this week, we are looking at 3.750 percent for a 30 year fixed (3.957 percent APR) and 3.000 percent for a 15 year fixed (3.593 percent APR).
We have some important news on the home price front. According to Fixerv, a financial analytics company, home values are expected to fall 3.6 percent by next June. This drop would represent a new low of 35 percent below the 2006 peak in home prices. As reported by Les Christie of CNN Money, Fixerv’s chief economist David Stiff noted that an expected increase in foreclosure activity and sustained high unemployment will account for the drop. Should it happen, this home price dip would be the third we have seen since 2009.