Economic News And How It Affects Todays Housing Markets

This Article Is About Economic News And How It Affects Todays Housing Markets

Are We Headed Towards A Second Recession?

Economists are warning of a potential second recession.

• The World’s 2nd largest economy, China, is seeing a huge slowdown in their real estate sector, where commercial buildings under construction can be seen in cities like Shanghai for 50 miles without end in sight
• Their bubble, like ours, and unlike ours, was built on the notion that demand would equal prices and inventory for a longer period of time than previously expected
• In our case, it was a credit leveraging issue with residential
• In theirs, it is widely commercial, and they control their own banks
• Bailing out yourself is much more challenging than bailing someone else out, since you have no hedge

Economic News And Corrections

This slowdown will possibly lead to a few corrections.

• First of all, in Europe, where their economy is facing a slowdown, a stronger dollar means less American exports
• This is since prices will inherently go up with a stronger currency in relation to the Euro
• Half of all S&P companies depend on Euro demand, ad this will lower financial projections

Hence lower profit margins and lower stock prices as a result.

Bond Market And Economic News

The need for liquidation in China will possibly result in an increase in bonds, as they will be forced to liquidate some or much of their holdings here.

• China and Japan are the largest holders of US foreign bond debt, so liquidating half a trillion could result in a higher rate, due to a perception of a higher risk
• Commodity prices have been stable, with some upswings
• But much of the stability is due to lower demand in fuel from OPEC and is their promise to push production to high levels to compete with American Shale a race they wish to turn into a marathon
• El Nino has promised some precipitation to hard-hit areas in the West Coast, and hopefully can stabilize food prices for the upcoming winter years, when they rise the most

China, unlike the US, needs a constant growth of over 8% to maintain the growing needs of its population, which is roughly 1.3 billion.   If the US grows 5% in a year, that is considered positive, while in theirs that is simply not enough.

About The Author

Mortgage Market News was written by Ron Granado of Plymouth Guaranty Corp. Ron Granado is the Chief Editor for Gustan Cho Associates Weekly Mortgage Market News published every Monday. Ron Granado is also a contributing writer for Gustan Cho Associates and a veteran real estate, credit, title, and mortgage market expert.  Ron Granado is sought by many real estate professionals such as real estate attorneys, real estate agents, mortgage professionals, and bankers for his extensive knowledge in compliance and industry regulations in the real estate and financial markets. Ron Granado has a national reputation when it comes to all real estate laws and regulations and is generous to share his invaluable extensive knowledge with real estate professionals nationwide. When there are new mortgage lending or financial regulations that are upcoming, Ron Granado is aware of it. Ron Granado’s expertise is appreciated by our viewers of Gustan Cho Associates as well as the viewers. Stay tuned for the next upcoming blog articles by Ron Granado.

Ron Granado

Account Executive | Plymouth Title Guaranty Corp

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