The Fed Says Economy's Improving, Tax Credit Extended to April
November 9, 2009 - The Federal Reserve held rates steady as expected last week, noting that the economy is improving, but still remaining historically weak overall. Time will tell if this balanced view will help markets move through what is expected to be an uneven period of economic activity as we drive toward more complete recovery. While the unemployment rate did jump to 10.2% and 190K jobs were lost in October, previous months' job losses were reduced by 91K. This slowing of job losses has led some analysts to begin speculating that we could see a recovery in the job market slightly earlier than expected.
Other positive economic indicators included a rebound in existing home sales and housing starts. Existing home sales jumped to 5.57 million units, a 9.4% increase from August. Housing starts had a 0.5% increase from August coming in at 590K for the month of September. Thirty year conforming rates continue to remain below 5% making refinances and purchases very attractive. In addition, ARM rates have also moved significantly lower as the yield curve has flattened in recent months.
Among the announcements from last week, there was news of the first-time homebuyer tax credit being extended through April 2010. The tax credit, which provides up to $8,000 to new homebuyers, has become more lenient with income restrictions, allowing more people to take advantage of the extension. The program should continue to support the housing rebound for at least another two quarters.