INFO THAT HITS US WHERE WE LIVE Housing was more affordable in November than at any time in the last 40 years. So it should come as no surprise that Existing Home Sales were UP 5.6% for November, bringing them to an annual rate of 4.68 million, a tad above the expected 4.65 million rate. Sales were up for single-family homes, although down for condos and coops, and all regions of the country registered gains.
The median price increased to $170,600 in November (not seasonally adjusted) and that figure is UP 0.4% over a year ago. The FHFA index of prices for homes bought with conforming mortgages also was up 0.7% in October (seasonally-adjusted), its first gain since May. The months' supply dipped to 9.5, with a decline in overall inventories.
Thursday saw new single-family home sales UP 5.5% for November, to a 290,000 annual rate, a little short of expectations. The months' supply of new homes dropped to 8.2 from October's 8.8 level. The new homes inventory is now down to 197,000, 65.6% off its 2006 peak, and the lowest inventory level going back to 1968. The median selling price went up to $213,000, after dipping under $200,000 in October.
Monday, December 27, 2010
Wednesday, December 22, 2010
The Economy is Stronger!
The Final Reading for 3rd Quarter Gross Domestic Product (GDP) was reported this morning at a 2.6% pace, slightly better than the previous reading but a bit lower than the 2.7% anticipated. Some optimistic "whisper numbers" - or gossip in the trading pits - had called for a reading north of 3%. However, we think, a deeper look into the number does raise concerns, as the gains came mostly from an upward rise in inventories, which offset a downward revision in household purchases. Now think about that - rebuilding inventory just means restocking of shelves, which would be normal ahead of the holiday season, and this particular type of gain has a "shelf life" (ahh…no pun intended, of course). At some point, consumer demand is what is needed to fuel GDP moving higher in a sustainable fashion, and that will in turn help create jobs.
Looking back at last year - for 2010 overall, the economy grew 3.7% in the 1st quarter, 1.7% in the 2nd quarter and 2.6% in the 3rd quarter. In order to create meaningful jobs and put a dent in the unemployment rate, we need to see GDP consistently above 3.5% - and it is likely GDP will be coming in less than that for most of 2011.
It will be interesting to see how the tax cut package and the remaining $450B+ dose of QE2 can help GDP. We expect to see an improved economy - but how much and how soon remains to be seen. Fortunately for the economy, inflation expectations have already ticked higher, as experts believe the Fed will meet their goal of creating inflation. (However, this is not fortunate for Bonds and home loan rates, as we've all been experiencing in recent weeks.) Yet this story isn't over - we need to see how inflation, GDP and jobs fare over the next couple months, which will give us a much better idea of the strength of the economy, and how soon it might be self sustaining, free from government support.
Good news from the housing sector - Existing Home Sales numbers arrived for November at 4.68M, better than expectations, as well as a nice pick up from October's numbers of 4.43M. Additionally, the inventory of unsold homes declined to a 9.5 month supply, a good drop from the prior month's 10.5 month supply. Encouraging news, as it shows that sidelined buyers are starting to dip their toes in the water - and with rates still relatively low, combined with affordable home prices, it remains an incredible time to buy.
Looking back at last year - for 2010 overall, the economy grew 3.7% in the 1st quarter, 1.7% in the 2nd quarter and 2.6% in the 3rd quarter. In order to create meaningful jobs and put a dent in the unemployment rate, we need to see GDP consistently above 3.5% - and it is likely GDP will be coming in less than that for most of 2011.
It will be interesting to see how the tax cut package and the remaining $450B+ dose of QE2 can help GDP. We expect to see an improved economy - but how much and how soon remains to be seen. Fortunately for the economy, inflation expectations have already ticked higher, as experts believe the Fed will meet their goal of creating inflation. (However, this is not fortunate for Bonds and home loan rates, as we've all been experiencing in recent weeks.) Yet this story isn't over - we need to see how inflation, GDP and jobs fare over the next couple months, which will give us a much better idea of the strength of the economy, and how soon it might be self sustaining, free from government support.
Good news from the housing sector - Existing Home Sales numbers arrived for November at 4.68M, better than expectations, as well as a nice pick up from October's numbers of 4.43M. Additionally, the inventory of unsold homes declined to a 9.5 month supply, a good drop from the prior month's 10.5 month supply. Encouraging news, as it shows that sidelined buyers are starting to dip their toes in the water - and with rates still relatively low, combined with affordable home prices, it remains an incredible time to buy.
Monday, December 20, 2010
Markets and the Holiday
Last Thursday it was good to see that Housing Starts picked up for November, rising 3.9% for the month to an annual rate of 555,000 units. This beat expectations and was especially gratifying because all the gain came from a 6.9% increase in single-family starts. These have now been up three out of the last four months.
Multi-family starts were down for the fourth month in a row, but these are very volatile on a monthly basis. In fact, the 12-month moving average for multi-family starts is still trending higher, up 5.9% compared to a year ago. The demand for multi-unit residences should continue to grow, which is why some observers foresee a large rebound in multi-unit construction in the new few months. Although there are still excess housing inventories, they are falling quickly and experts expect them to drop further, even with a home building recovery.
>> Review of Last Week
THREE IN A ROW... Investors sent stocks higher for the third straight week on Wall Street. The markets weren't exactly on fire, as volumes were low, which is typical for this time of year, and investors remain guardedly optimistic, which has been their attitude since last month's elections. As happens so often, the week's festivities were driven by the economic headlines and there certainly were plenty to ponder.
The consumer appears to be showing up for the holidays, as retail sales went up 0.8% in November, up 1.2% excluding autos. Including revisions to September and October numbers, overall sales were up 1.5% for the month. Retail is now UP 7.7% over a year ago, and sales are up at a 12% annual rate for the past five months! On the worrisome side, the November Producer Price Index (PPI) showed wholesale inflation up 0.8%, although the Consumer Price Index (CPI) rose a benign 0.1%. Consumer prices are up 1.1% over a year ago, which is good, but wholesale prices are up 3.5% for the year, which isn't so good if you want to keep inflation in check and interest rates down.
The jobs recovery is key to the housing rebound, so it was good to see new unemployment claims falling again last week, to 420,000. This beat expectations and was the second lowest number this year for weekly claims, which have now fallen three times in the last four weeks. The Philadelphia Fed index showed manufacturing continues to grow in that region, as it was up nicely for December. Likewise, the Empire State index showed New York manufacturing coming back strong in December after last month's dip. November Industrial Production rose above expectations and capacity utilization showed factories at their highest volume levels since October 2008.
For the week, the Dow was UP 0.7%, to 11491.91; the S&P 500 was UP 0.3%, to 1243.91; and the Nasdaq was UP 0.2%, to 2642.97.
With investors feeling more upbeat about the economy, money flowed into stocks and out of the bonds that fund most mortgage loans. The FNMA 30-year 4.0% bond we watch ended down 78 basis points for the week, closing at $98.22. This inched mortgage rates higher once again. Freddie Mac's weekly survey of conforming mortgages had the average 30-year fixed-rate mortgage rate up for the fifth week in a row. Rates are still historically low, but people looking to purchase or refinance should be aware that the low-rate party may soon be over.
>> This Week’s Forecast
HOUSING, INFLATION AND THE OVERALL ECONOMY... This week we get to see how the economy is coming along in some key areas. We track the housing recovery with Wednesday's Existing Home Sales and Thursday's New Home Sales, both expected to be up a bit for November. Continuing the theme of a steady if slow recovery, the third estimate of GDP should show the overall economy growing at a 2.7% annual rate, up from the prior 2.5% estimate. Again, a slower rate of growth than economists would like to see, but growth nonetheless.
Thursday brings more inflation readings, with both Personal Spending and Core PCE Prices expected to remain under control. The final December reading on University of Michigan Consumer Sentiment may be up a small amount, while November Durable Goods Orders may be down a tad. The markets will be closed Friday.
Happy Holidays to you and yours during this joyous season!
Multi-family starts were down for the fourth month in a row, but these are very volatile on a monthly basis. In fact, the 12-month moving average for multi-family starts is still trending higher, up 5.9% compared to a year ago. The demand for multi-unit residences should continue to grow, which is why some observers foresee a large rebound in multi-unit construction in the new few months. Although there are still excess housing inventories, they are falling quickly and experts expect them to drop further, even with a home building recovery.
>> Review of Last Week
THREE IN A ROW... Investors sent stocks higher for the third straight week on Wall Street. The markets weren't exactly on fire, as volumes were low, which is typical for this time of year, and investors remain guardedly optimistic, which has been their attitude since last month's elections. As happens so often, the week's festivities were driven by the economic headlines and there certainly were plenty to ponder.
The consumer appears to be showing up for the holidays, as retail sales went up 0.8% in November, up 1.2% excluding autos. Including revisions to September and October numbers, overall sales were up 1.5% for the month. Retail is now UP 7.7% over a year ago, and sales are up at a 12% annual rate for the past five months! On the worrisome side, the November Producer Price Index (PPI) showed wholesale inflation up 0.8%, although the Consumer Price Index (CPI) rose a benign 0.1%. Consumer prices are up 1.1% over a year ago, which is good, but wholesale prices are up 3.5% for the year, which isn't so good if you want to keep inflation in check and interest rates down.
The jobs recovery is key to the housing rebound, so it was good to see new unemployment claims falling again last week, to 420,000. This beat expectations and was the second lowest number this year for weekly claims, which have now fallen three times in the last four weeks. The Philadelphia Fed index showed manufacturing continues to grow in that region, as it was up nicely for December. Likewise, the Empire State index showed New York manufacturing coming back strong in December after last month's dip. November Industrial Production rose above expectations and capacity utilization showed factories at their highest volume levels since October 2008.
For the week, the Dow was UP 0.7%, to 11491.91; the S&P 500 was UP 0.3%, to 1243.91; and the Nasdaq was UP 0.2%, to 2642.97.
With investors feeling more upbeat about the economy, money flowed into stocks and out of the bonds that fund most mortgage loans. The FNMA 30-year 4.0% bond we watch ended down 78 basis points for the week, closing at $98.22. This inched mortgage rates higher once again. Freddie Mac's weekly survey of conforming mortgages had the average 30-year fixed-rate mortgage rate up for the fifth week in a row. Rates are still historically low, but people looking to purchase or refinance should be aware that the low-rate party may soon be over.
>> This Week’s Forecast
HOUSING, INFLATION AND THE OVERALL ECONOMY... This week we get to see how the economy is coming along in some key areas. We track the housing recovery with Wednesday's Existing Home Sales and Thursday's New Home Sales, both expected to be up a bit for November. Continuing the theme of a steady if slow recovery, the third estimate of GDP should show the overall economy growing at a 2.7% annual rate, up from the prior 2.5% estimate. Again, a slower rate of growth than economists would like to see, but growth nonetheless.
Thursday brings more inflation readings, with both Personal Spending and Core PCE Prices expected to remain under control. The final December reading on University of Michigan Consumer Sentiment may be up a small amount, while November Durable Goods Orders may be down a tad. The markets will be closed Friday.
Happy Holidays to you and yours during this joyous season!
Saturday, December 18, 2010
Is the Party Over?
Is the low interest rate party over? No one can say for sure...but recently mortgage rates have begun to move up. What we can say for sure is that rates can’t stay at historic lows forever and now may be the perfect time to refinance or purchase your dream home. So if you or anyone you know may be thinking about home financing please have them contact us right away, because the party may be over soon!
Saturday, December 11, 2010
Money Facts
More about money – some interesting info...
Money might not buy happiness, but it does make the world go round and everybody seems to want to get their hands on it. Here are some intriguing details about our currency:
What's the biggest bill ever issued? The $100,000 Gold Certificate of 1934. President Woodrow Wilson's portrait was on these bills, which were only used by Federal Reserve banks and never went into general circulation.
How much of our money is in dollar bills? In fiscal year 2009, 42.9% of the bills printed were $1 notes.
How long does money last? Money may not stay long in your wallet, but it does hang around for a while out in the world. The government reports these average life spans for the various bills: $1 - 42 months; $5 - 16 months; $10 - 18 months; $20 - 24 months; $50 - 55 months; and $100 - 89 months. When bills are too worn, they're pulled from circulation and replaced. Coins last about 25 years.
How many pennies would it take to stretch across the country? It takes 84,480 pennies to cover a mile and over 250 million of them to go coast to coast. That adds up to over $2.5 million.
Did any bill ever have a picture of a woman? Martha Washington's portrait was on the face of the 1886 and 1891 $1 Silver Certificates and on the back of the ones issued in 1896.
Has a portrait of an African American ever been on U.S. currency? Commemorative coins in the 1940s had pictures of George Washington Carver and Booker T. Washington and a recent one honored Jackie Robinson. No paper money has had an African American's portrait, but the signatures of four African American Registers of the Treasury have been on our bills – Blanche K. Bruce, Judson W. Lyons, William T. Vernon, and James C. Napier – as well as the signature of one African American woman, Azie Taylor Morton, the 36th Treasurer of the United States, who served from 1977 to 1981.
What kind of paper do they use to print money? They don't. Our bills are a 75% cotton - 25% linen blend with silk fibers throughout. This is far more durable than paper when wet.
How tough is our money? Government tests show our bills can be folded forward and backward 4,000 times before they tear.
What is that eye at the top of the pyramid? The "all-seeing eye" is a symbol of divine providence.
E Pluribus Unum – what's it mean? This Latin motto means, "Out of many, one." It can be freely translated as, "Many uniting into one." It has been on the Great Seal of the United States since 1782, but didn't wind up on our money until 1902.
Is a torn bill still worth something? The U.S. Bureau of Engraving and Printing (BEP) says on their website: "The BEP redeems partially destroyed or badly damaged currency as a free public service....The Office of Financial Management, located in the BEP, uses experts to examine mutilated currency and will approve the issuance of a Treasury check for the value of the currency determined to be redeemable."
Our final point about money has to do with saving some on your mortgage. Please note that mortgage interest rates are still at historically low levels and many observers think there may never be a better time to purchase or refinance a home than now. Feel free to contact us about any matters relating to home financing or refinancing.
Most importantly, we wish you and your loved ones all the best this holiday season – and a happy and prosperous New Year!
... Have a great day!
Monday, December 6, 2010
For the week of December 6, 2010
For the week of December 6, 2010 –
>> Market Update
INFO THAT HITS US WHERE WE LIVE Last Thursday the National Association of Realtors (NAR) reported Pending Home Sales for October UP 10.4% over the month before. This index is a measure of signed purchase contracts, which bodes well for Existing Home Sales a couple of months out. The NAR's chief economist commented, "It is welcoming to see a solid double-digit percentage gain, but activity needs to improve further to reach healthy, sustainable levels. The housing market clearly is in a recovery phase and will be uneven at times, but the improving job market and consequential boost to household formation will help the recovery process going into 2011."
Tuesday, the S&P/Case-Shiller home price index was down 0.8% in September for the 20 largest metro areas in the country. This was the third month in a row the index dipped, but national average home prices are still up 0.6% versus a year ago. Prices are also 3.2% above the May 2009 bottom and some analysts do not expect prices to go below that level. Opinions differ, however. Check out this map on the risk of price declines in various parts of the country: http://www.smartmoney.com/tools/worksheets/?story=SMARTMONEYMARKET101115
>> Review of Last Week
BAD JOBS, GOOD WEEK... The week ended on a November Jobs report that delivered less-than-expected payroll gains and a slightly higher unemployment rate, but Wall Street basically shrugged it off. In fact, there was enough good economic news that investors sent all three stock market indexes UP solidly for the week.
Let's start with those disappointing employment numbers. Non-farm payrolls grew in November by 39,000, but the consensus expected 150,000. But September and October revisions added 38,000 jobs, taking the net gain to 77,000. Payrolls in the private sector were up 50,000, their eleventh straight monthly gain, and prior months' revisions added 6,000, for a net gain of 56,000. No one was happy to see the unemployment rate creep up to 9.8%, but with growing payrolls, more people are jumping back into an improving jobs market, so the workforce is growing. New weekly jobless claims also grew, but the four-week moving average dropped to its lowest level in over two years.
More obvious good economic news came in the form of the rising October Pending Home Sales figure reported above. Q3 Productivity was also UP 2.3% annually and UP 2.5% over last year. Both Chicago manufacturing and Consumer Confidence numbers were UP and the ISM Services index came in better than expected, as did same store retail sales. Even all the recent fears over European debt subsided, with the European Central Bank President hinting at more support for the region.
For the week, the Dow was UP 2.6%, to 11382.09; the S&P 500 was UP 3.0%, to 1224.71; and the Nasdaq was UP 2.2%, to 2591.46.
Even though bonds first benefited from the disappointing jobs report, prices eventually came under pressure from money flowing back into rallying stocks. The FNMA 30-year 4.0% bond we watch ended down 89 basis points for the week, closing at $100.20. National average rates for fixed-rate mortgages headed north a tad, according to Freddie Mac's survey of conforming mortgage rates. They're still at historically low levels, but wise buyers and refinancers shouldn't wait.
>> This Week’s Forecast
TAKING A BREAK... After last week's busy schedule of economic news, we'll be taking a bit of a breather this week. The weekly Initial Unemployment Claims and Continuing Claims will continue to hold our interest and are expected to show a slowly strengthening jobs picture. Friday's October Trade Balance is forecast to hold steady. Right after that, we'll see a reading on the University of Michigan Consumer Sentiment Index, which is expected to keep tracking upward.
>> The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
Economic Calendar for the Week of December 6 – December 10
Date Time (ET) Release For Consensus Prior Impact
W
Dec 8 10:30 Crude Inventories 12/4 NA 1.07M Moderate
Th
Dec 9 08:30 Initial Unemployment Claims 12/4 430K 436K Moderate
Th
Dec 9 08:30 Continuing Unemployment Claims 11/27 4.250M 4.270M Moderate
F
Dec 10 08:30 Trade Balance Oct –$44.4B –$44.0B Moderate
F
Dec 10 09:55 Univ. of Michigan Consumer Sentiment Dec 72.5 71.6 Moderate
>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months All the experts still feel the Fed Funds Rate will stay at its super low level through the first half of next year. A threat of inflation, or a strengthening of the economic recovery, of course, could start rates back up. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.
Current Fed Funds Rate: 0%–0.25%
After FOMC meeting on: Consensus
Dec 14 0%–0.25%
Jan 26 0%–0.25%
Mar 15 0%–0.25%
Probability of change from current policy:
After FOMC meeting on: Consensus
Dec 14 <1%
Jan 26 <1%
Mar 15 <1%
>> Market Update
INFO THAT HITS US WHERE WE LIVE Last Thursday the National Association of Realtors (NAR) reported Pending Home Sales for October UP 10.4% over the month before. This index is a measure of signed purchase contracts, which bodes well for Existing Home Sales a couple of months out. The NAR's chief economist commented, "It is welcoming to see a solid double-digit percentage gain, but activity needs to improve further to reach healthy, sustainable levels. The housing market clearly is in a recovery phase and will be uneven at times, but the improving job market and consequential boost to household formation will help the recovery process going into 2011."
Tuesday, the S&P/Case-Shiller home price index was down 0.8% in September for the 20 largest metro areas in the country. This was the third month in a row the index dipped, but national average home prices are still up 0.6% versus a year ago. Prices are also 3.2% above the May 2009 bottom and some analysts do not expect prices to go below that level. Opinions differ, however. Check out this map on the risk of price declines in various parts of the country: http://www.smartmoney.com/tools/worksheets/?story=SMARTMONEYMARKET101115
>> Review of Last Week
BAD JOBS, GOOD WEEK... The week ended on a November Jobs report that delivered less-than-expected payroll gains and a slightly higher unemployment rate, but Wall Street basically shrugged it off. In fact, there was enough good economic news that investors sent all three stock market indexes UP solidly for the week.
Let's start with those disappointing employment numbers. Non-farm payrolls grew in November by 39,000, but the consensus expected 150,000. But September and October revisions added 38,000 jobs, taking the net gain to 77,000. Payrolls in the private sector were up 50,000, their eleventh straight monthly gain, and prior months' revisions added 6,000, for a net gain of 56,000. No one was happy to see the unemployment rate creep up to 9.8%, but with growing payrolls, more people are jumping back into an improving jobs market, so the workforce is growing. New weekly jobless claims also grew, but the four-week moving average dropped to its lowest level in over two years.
More obvious good economic news came in the form of the rising October Pending Home Sales figure reported above. Q3 Productivity was also UP 2.3% annually and UP 2.5% over last year. Both Chicago manufacturing and Consumer Confidence numbers were UP and the ISM Services index came in better than expected, as did same store retail sales. Even all the recent fears over European debt subsided, with the European Central Bank President hinting at more support for the region.
For the week, the Dow was UP 2.6%, to 11382.09; the S&P 500 was UP 3.0%, to 1224.71; and the Nasdaq was UP 2.2%, to 2591.46.
Even though bonds first benefited from the disappointing jobs report, prices eventually came under pressure from money flowing back into rallying stocks. The FNMA 30-year 4.0% bond we watch ended down 89 basis points for the week, closing at $100.20. National average rates for fixed-rate mortgages headed north a tad, according to Freddie Mac's survey of conforming mortgage rates. They're still at historically low levels, but wise buyers and refinancers shouldn't wait.
>> This Week’s Forecast
TAKING A BREAK... After last week's busy schedule of economic news, we'll be taking a bit of a breather this week. The weekly Initial Unemployment Claims and Continuing Claims will continue to hold our interest and are expected to show a slowly strengthening jobs picture. Friday's October Trade Balance is forecast to hold steady. Right after that, we'll see a reading on the University of Michigan Consumer Sentiment Index, which is expected to keep tracking upward.
>> The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.
Economic Calendar for the Week of December 6 – December 10
Date Time (ET) Release For Consensus Prior Impact
W
Dec 8 10:30 Crude Inventories 12/4 NA 1.07M Moderate
Th
Dec 9 08:30 Initial Unemployment Claims 12/4 430K 436K Moderate
Th
Dec 9 08:30 Continuing Unemployment Claims 11/27 4.250M 4.270M Moderate
F
Dec 10 08:30 Trade Balance Oct –$44.4B –$44.0B Moderate
F
Dec 10 09:55 Univ. of Michigan Consumer Sentiment Dec 72.5 71.6 Moderate
>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months All the experts still feel the Fed Funds Rate will stay at its super low level through the first half of next year. A threat of inflation, or a strengthening of the economic recovery, of course, could start rates back up. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.
Current Fed Funds Rate: 0%–0.25%
After FOMC meeting on: Consensus
Dec 14 0%–0.25%
Jan 26 0%–0.25%
Mar 15 0%–0.25%
Probability of change from current policy:
After FOMC meeting on: Consensus
Dec 14 <1%
Jan 26 <1%
Mar 15 <1%
Thursday, December 2, 2010
Mortgage Rates and bonds.
"Mortgage Bonds opened sharply lower, but have recovered from their worst levels. Yesterday, a wild sell-off in Bonds was sparked by good economic news from China, speculation that the European Central Bank would consider more Quantitative Easing of their own to aid their troubled member countries and better than expected ADP numbers.
This morning, Initial Jobless Claims were reported higher than expected but the closely watched 4-week moving average moved to a low not seen since August of 2008. This is an encouraging sign and tells us that the labor market is getting better.
I feel that tomorrow's government jobs report will come in at or better than expectations, so at this time I am recommending a Locking bias."
This morning, Initial Jobless Claims were reported higher than expected but the closely watched 4-week moving average moved to a low not seen since August of 2008. This is an encouraging sign and tells us that the labor market is getting better.
I feel that tomorrow's government jobs report will come in at or better than expectations, so at this time I am recommending a Locking bias."
Subscribe to:
Posts (Atom)
