Today, the markets received a flurry of economic reports that puzzled even the most seasoned investors. The first of these reports, the MBA Mortgage Application Survey, pointed towards a stabilizing housing market. It showed a seasonally adjusted 1.3% increase in the number of mortgage applications filed last week compared with the prior week. Refinance applications increased a seasonally adjusted 2.3%, while loan applications to buy homes increased only slightly, up 0.4%.
The good news stopped there. The Challenger Layoffs Report, a monthly tally of layoff notices, was released soon after the MBA report. Tens of thousands of jobs were lost in the month of August. Layoff announcements surged 85%, to a tune of 79,459. 35,752 jobs were lost within the financial sector alone, where the cuts were attributed to the credit crisis and the housing slowdown. Corporations such as American Home Mortgage, First Magnus, Lehman Bros, and Accredited Home Lenders led the surge by laying off a significant percentage of their workforce within their respective mortgage lending and servicing units.
Although the markets opened lower following the release of both reports, the pending home sales report completely rattled the markets, setting the stage for a bearish Wednesday. The index for pending home resales, or the number of contracts signed for the purchase of a previously owned home, dropped an unexpected 12.2% for the month of July. It fell to 89.9, the lowest number since records began in September 2001.
The report points toward a continuing housing slump and contradicts the previous MBA survey. So a burning question arises: have we reached the bottom of the dreaded housing slowdown, or are we in the midst of something worse? There really is no definite answer at this point in time, but these coming weeks will be very telling.