Eye on the Economy with Adam Perrotta
- Oct 17, 2008
The markets have whipsawed over the past weeks, with the Dow index seeing its worst stretch ever–an eight-day plummet of 2,400 points which wiped out some $2.4 trillion in market value–only to be followed by a record gain of 936 points.
Recent days, though, have seen a stepping up of efforts around the world to deal with the financial crisis. Some details of the government’s $700 billion financial rescue program have now been revealed, and the government announced plans to invest some $250 million into preferred stock equity positions in a number of banks. Across the Atlantic, 15 European nations devised a plan to aid their faltering banks by injecting capital and guaranteeing interbank lending.
Some better than expected news out of the single-family home sector, as it was revealed that pending home sales jumped in August. The National Association of Realtors’ index for pending sales of existing homes jumped 7.4 percent over July’s figure. Most observers had predicted a 1 to 2 percent decline for the month. August’s better than expected numbers, though, did come well before the financial crisis deepened over the past weeks. Meanwhile, the median price for an existing home sold so far this year was just over $200,000, according the NAR. That’s down from a median of $219,000 in 2007.
That good news though, was tempered with the announcement that housing starts reached a 17-year low in September, according to the Commerce Department. Privately owned housing starts fell to an annual rate of 544,000 in September, down 12 percent from August and 31.1 percent lower than September 2007.
While single-family home starts were down, new multi-family construction rose to an annual rate of 254,000 units, up 14,000 from September. The shift toward multi-family development may be an indicator of an overall demand shift from buying to renting as the days of easy-to-obtain mortgages at low rates seem to be over.
The employment market also saw some relief last week, as the number of American workers filing new jobless claims fell 20,000 during the previous week, according to the Labor Department. Initial claims for unemployment benefits declined to 478,000 during the week ending Oct. 4, largely due to easing of the impact from hurricanes Gustav and Ike. The reading was the lowest since mid September, but remained at a level indicating a weakened job market.