Economist's Commentary: March 31, 2008

Quick Take on the Economy: March 31, 2008

By Lawrence Yun, Chief Economist

NAR Chief Economist Lawrence Yun Today's Quick Take focuses on the Purchasing Manager Survey and the U.S. Treasury rate.

A couple of regional surveys of Purchasing Managers show mixed results.

The Chicago index rose to 48.2 in March from 44.5 from a month before.
The New York index, which uses a different measurement scale, fell ever so slightly to 425.8 in March from 427.7 from a month before.
The data hints that tomorrow's national reading on the Purchasing Manager's Index will show little change.
This index is based on a survey of people in the field who are buying and ordering and selling things. It was said to be Alan Greenspan's favorite indicator to get a heads-up about economic trends.

The 10-year Treasury yield touched 3.4% this morning to the lowest point in 5 years. Aside from a few months of exceptionally low rates in 2003, one has to go back all the way to the early 1960s to see Treasury rates this low.
In normal times, the 30-year fixed rate mortgage rates would be priced 160 to 180 basis points above the 10-year Treasury yields.
That means mortgage rates should be averaging 5.0% to 5.2% in normal times. Rather, Freddie Mac says the mortgage rates were averaging at 5.8%.
That rate is still at historic lows. Mortgage rates averaged 10% in early 1990s and 8% in 2000. They averaged 6.4% in 2006 and 2007.

The economy is very soft at essentially a zero growth state - so job market anxiety is present.
Mortgage rates are at historic lows, even though they could be substantially lower if the financial market was free-and-clear of the credit crisis.

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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