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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: Perspective who wrote (7829)6/11/2004 11:42:51 AM
From: russwinter  Read Replies (1) of 116555
 
Yes, the refi collapse coupled with no more tax refunds should slow the consumer, but he still has his house to make him feel wealthy and borrow against (HELOCs: home equity line of credit), and that's why the purchase index is the key now. Goes below 400 and then to 350, marginal buyers are removed, activity drops off, house on the market longer, more price concessions, and psychology changes from maniacal (*) to neutral and then to defensive. As psychology shifts, activity slows even more, even at the same same interest rate. Each incremental rate increase, even 25 bps, shocks the overloaded system even more. Rate increases on old ARMs and variable rate add even more pressure.

(*) maniacal psychology
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