TEXT OF INTERVIEW
BOB MOON: On the heels of yesterday’s stunning 27 percent setback in sales of existing homes, this morning there’s word demand for home refinancing is way up — lifting new mortgage applications to their highest level in more than 15 months. And orders to durable goods are up by a small margin. Will that be enough to give the economy — and the markets — a much-need jolt? Let’s try making some sense of it all with economist Richard DeKaser, who heads Woodley Park Research. Good morning, Richard.
RICHARD DEKASER: Good morning.
MOON: Once again, the Dow is threatening to slip below the 10,000 mark, as it did briefly yesterday. Why do you think the latest housing numbers dealt us such a blow? We’ve been struggling with that problem for many months now.
DEKASER: It all has to do with expectations, Bob. Most economists were expecting a terrible number, but it came in even far worse. So this raises concerns that maybe the housing market — which has stabilized unambiguously over the past year in terms of prices and sales — maybe is starting a second leg down. I’d say it’s premature to draw that conclusion, but that’s where the anxiety lies.
MOON: Yes, but what about today’s numbers on new mortgage applications, mainly for re-fi’s. That’s going to put extra cash into the hands of consumers just when the economy needs it, right?
DEKASER: Yes it does. And this is what the economy needs. It needs a little time and as people have been refinancing, for example, they’re lowering their debt burdens. Two years ago, three years ago, people were spending 19 cents out of every dollar to service their debts and other obligations. That’s down to about 17 cents. May not sound like a lot, but that translates into billions of dollars and that will provide some support.
MOON: So we’re now in our third down week for stocks, the Dow flirting with the 9,000s again. What does Wall Street need to turn this around? Maybe if those new homes sales numbers out shortly aren’t so bad?
DEKASER: That might help. New homes sales are important. They tend to close faster and be a little bit more leading indicator than the existing home sales number we saw yesterday. If we see a modest improvement here, that would suggest that really we’ve lived through the post-tax-credit-induced downturn and that maybe we’re seeing the nose turned up one again.
MOON: Well, we’ll keep our fingers crossed. Economist Richard DeKaser at Woodley Park Research. Thanks for your insights this morning.
DEKASER: My pleasure.
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