Economist's Commentary: October 6, 2008

Quick Take on the Economy: October 6, 2008

By Lawrence Yun, NAR Chief Economist

Harsh job data last Friday and the continuing clogging of the global financial system are hammering the stock markets worldwide.
Very high short-term LIBOR rates and markedly lower commercial paper issuance (for short-term borrowing by corporations) are testament to the clogging of the financial system.
The economy has entered a contractionary phase no doubt for most of the industrialized countries. Corporate profits will slow. Stock markets, hence, are reflecting this outlook.
Low stock market valuation, in turn, impact consumers negatively. Wallets will be held tighter and spending will turn negative.
A part of the decline could be purely "technical." The stock market at times moves on momentum based on something called support and resistance levels - which are unrelated to real economic events. Today, the support level broke, which means momentum investors will be selling, selling and selling.

When the stock market tumbles the Treasury yields generally fall. Mortgage rates therefore would be falling as well. More than 90 percent of the workforce have a job, so it is a matter of confidence of these people in taking advantage of the current low mortgage rates.
Oil prices are tumbling on the prospect of lower global oil demand as the world's heavy economies slow or contract. Falling oil prices help many REALTORS who need to drive often.

This is one in a series of commentaries by the Research staff of the National Association of REALTORS®. Read more commentaries >

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