According to the U.S. Bureau of Labor Statistics the unemployment has now reached a staggering 9.1%.  While there has been SOME slowing in the number of jobs lost, unemployment remains high hampering efforts at an economic recovery.

But just how does that stack up to the Great Depression?  In the early stages of the Great Depression, unemployment hit nearly 16% in 1931.  Towards the middle of the Great Depression in 1934, unemployment peaked at nearly 25%.

Are we on our way to another Great Depression?  The current economic collapse started in late 2007, nearly two years ago.  The Great Depression started in 1929 and lasted roughly the entire decade of the 1930′s.  I wouldn’t dare to guess if we’re in for something similar in nature, as it’s impossible to predict future events.  But if unemployment is a measure you can look at it two ways, 1) this isn’t nearly as bad as the Great Depression (glass half full) or 2) things can get a WHOLE lot worse (glass half empty).

I choose to be a glass half full kind of thinker…

The Fed dropped rates a few weeks back, and today Bernanke opened the door yet again for further rate reductions. As previously mentioned, mortgage rates don’t necessarily track the fed funds rate, but rather act uniquely and in many cases are more closely correlated with the 10 year treasury.

With mortgage rates down nationally, mortgage applications are on the rise! This is a good sign for the broader US economy. We need stabilization of the real estate markets first and foremost.

Here in Las Vegas, home inventories were well over a 20 month supply a year ago – it was reported this week that there’s roughly a 9 month inventory on the market now. This is a great sign for one of THE SINGLE MOST depressed real estate markets in the country!

A 30 year fixed mortgage last week was roughly 6.24%, down about .23% from the prior week. This spurred the increase in mortgage loan applications.

We’re still a year into a bear market and suffering through one of the most devastating economies in years. It’s still a perfect storm of:

1. real estate prices depressed
2. institutional “de-leveraging” of their loan portfolios and business structure
3. foreclosures still rampant
4. mortgage rate spreads widening increasing rates (though this has reversed recently to some extent)
5. unemployment the highest it’s been since the 9/11 era
6. equity capital markets acting completely irrational and volatility at extreme levels
7. oil prices soaring, then subsequently falling
8. the dollar getting crushed, then recently recovering somewhat
9. the prospect of higher tax rates on capital gains, the wealthy, and small business
10. FEAR, FEAR, FEAR – 70% of the economy is directly related to consumer spending and the American population has no confidence, with statistical confidence levels at a 40 year low.

Mortgage loans being made now are good loans however – it’s nearly impossible to get a loan without a substantial down payment or equity in the collateral property. It’s also nearly impossible to get a home loan with poor credit, and forget about “stated income”!

The foreclosures will work their way through the system, as will the deleveraging process. Eventually home inventory will shrink, forcing real estate stabilization.

There are some bright sides to the economy and I choose not to be downtrodden with all of the negativity in the news. America is a resilient nation – we will bounce back, and likely stronger than ever!

Today the Federal Reserve cut the key fed funds rate by .50 to 1.00% – as low as it’s ever been. But will mortgage rates and other home loan rates follow? That remains to be seen.

Mortgage rates and other home loans are more closely tied to other indices, one for example is the 10 year treasury bond. It’s quite possibly mortgage rates WILL come down a bit, but in this credit crunched environment rates are more influenced by credit spreads and willingness to loan by financial institutions.

Recent rate cuts haven’t done much for mortgage rates or other home loans with the exception being home equity lines of credit and other adjustable rate loans. Such adjustable rate loans have enjoyed a increasingly lower interest rate this year.

The fed hopes to spur lending activity in the broader economy with this recent move. Unfortunately rate changes typically have a lag time before we see any effect in the real world. We’ll know more in another 6 to 9 months or so. But keep in mind, the fed has already been cutting rates for quite some time and the economy has continued to slump!