Market News

• Oil prices soared to record highs again on Wednesday as investors continued to fret about supplies (Reuters via The New York Times May 21). July crude jumped by $2.90 to a record-high $132.08 a barrel on the New York Mercantile Exchange. The Energy Information Administration reported that domestic crude stocks declined by 5.4 million barrels to 320.4 million barrels last week. Crude-oil imports also plunged. Higher crude prices have fueled price surges in gasoline. Retail gas prices hit record highs for the 14th consecutive day on Wednesday, according to AAA (CNNMoney.com May 21). The nationwide average for regular unleaded increased to $3.807 a gallon, from $3.80 the previous day. Gas prices are up 9% from last month and 19% from a year ago. High gasoline prices have weakened auto sales and pinched consumers already strapped by rising food and medical-care costs ...
• Declining prices have made homes more affordable in many cities, according to the latest Wells Fargo/ National Association of Home Builders (NAHB) Housing Opportunity Index. During the first quarter, 53.8% of all new and existing homes sold nationwide were affordable to households earning the median income of $61,500. That's up from 44% during the fourth quarter and the highest level since the second quarter of 2004. "Three factors combined to substantially increase housing affordability nationwide--mortgage rates returning to near the record low levels of a few years ago, a $2,500 rise in family income nationwide and lower house prices," said NAHB President Dandy Dunn. However, critics note that rising affordability alone won't boost home sales. "While affordability is an important factor that will contribute to recovery of housing markets eventually, improved affordability is unlikely to lift markets out on its own," said National City Corp. Chief Economist Richard DeKaser. NAHB's index assumes constant lending standards. However, lenders have substantially tightened standards this year (CNNMoney.com and nahb.org May 21) ...
• Home prices will continue to decline, said Fannie Mae President and Chief Executive Daniel Mudd in a speech to shareholders in New Orleans on Tuesday. The housing crisis is "about halfway through," and prices could plunge as much as 25% before the market begins to recover, said Mudd. He noted that the housing market is in the middle of its most severe downturn since the Great Depression. However, Mudd said Fannie will be able to weather the downturn and expand its business. Federal regulators have eased capital requirements for Fannie and Freddie Mac, in a bid to help them bolster the housing market (Associated Press via CNNMoney.com May 21) ...
• Mortgage activity declined last week as rates rose, the Mortgage Bankers Association reported Wednesday (mbaa.org May 21). The trade group's Market Composite Index fell 7.8% during the week ending May 16 to 621.6. The Refinance Index declined 8.7% to 2210.5, while the Purchase Index dropped 6.9% to 352.5. The average 30-year, fixed-rate mortgage (FRM) rose 8 basis points to 5.9%, and the one-year, adjustable-rate mortgage increased 11 basis points to 6.71%. Falling home prices, tight lending standards, and still-high mortgage rates continue to dampen mortgage activity, said Moody's Economy.com (May 21). The research firm noted that the 30-year FRM is 70 basis points higher than it was at the bottom of the 2001-2003 economic downturn ...