Hiccup in Home Prices a Setback for Bank Rates
December 30, 2009
It's not a disaster, but it is a discouraging note if you've been watching and waiting for savings account rates, money market rates, and CD rates to improve.
After five straight months of increases, the S&P Case-Shiller home price index was reported yesterday to be flat for the month of October. The S&P Case-Shiller index is focused on prices of existing, single-family homes.
A recovery in housing is considered to be a key for economic recovery in general. You can consider residential real estate prices both a cause and an effect of other economic factors. They are the effect of the overall state of household finances -- income, debt levels, etc. As these factors strengthen, foreclosures slow down and housing prices stabilize. Thus, housing is a reflection of the underlying strength of the U.S. consumer.
Of course, housing has also been the cause of many of the woes that have plagued the banking sector. Thus, further trouble in the housing market could precipitate a further round of problems for banks.
In terms of bank rates, a slowdown in the housing recovery is bad as both an effect and a cause. As an effect of economic weakness, softness in housing is a sign that the strengthening economic demand which would drive bank rates higher may be delayed. As a potential cause of problems for banks, a relapse in the housing market could lead to another round of concerns about the safety of bank deposits.
Certainly, in economics one month does not constitute a trend. However, what's slightly troubling about the slowing of the housing recovery is that the S&P Case-Shiller index is based on a three-month moving average. Thus, this piece of bad news may have more substance than meets the eye.
Mike666
30 December 2009 at 6:24 pm
Bank savings rates will rise when wall street tells the Ben Barnyardke puppet to raise the rates and thats that.
I think the Ben puppet should give everyone that lost savings over 100 G a reimbursement . sure we were stupid enough to have to0 much money in some banks but the puppet gave banks the rest of our money to use at unbelievable low prices. I think the Ben Puppet should be made to stop stealing from the Average American to bail out the banks .
As some clowns are writing about bank CD's and MMA possibly rising one of accounts with at shore bank I read is dropping from 1.95 all the way to 1.70 for new Year Happy freaking New Year. How much longer will Obama allow the rich to steal from the poor?