- Week of April 26, 2010

INFO THAT HITS US WHERE WE LIVE

The week ended on the most dramatically impressive new home sales numbers in 47 years. March's 26.9% increase was the biggest monthly sales gain since 1963, taking us to a 411,000 annual rate! Supply dropped to 6.7 months, inventories fell to 228,000 and the median price went to $214,000, up 4.3% versus last year. Some put the sales surge to the soon-to-expire tax credit, but the facts remain that the economy IS recovering and homes ARE substantially more affordable!

The day before, March existing home sales came in UP 6.8% at a 5.35 million annual rate, UP 16.1% from a year ago, with all regions showing gains! The existing home median price went to $170,700, UP 0.4% from a year ago. These good numbers reversed a three-month slide and sent the supply of existing homes down to 8.0 months.

On April 22, the EPA's new lead paint renovation rules went into effect. These require contractors who are disturbing lead-based paint in homes built before 1978 to hire certified renovators working for a certified renovator firm using lead-safe work practices. Realtors need to advise sellers to use certified professionals to fix up a home and to make sure it's safe for buyers to move into a home that's been renovated. The real estate disclosure must include any tests for the presence of lead paint and any dust wipe testing done after lead paint's been disturbed. Property managers with pre-1978 homes must also hire certified renovators. Find more info at http://www.realtor.org/government_affairs/lead_paint_main. Or visit the EPA at http://www.epa.gov/lead/pubs/renovation.htm.

Review of Last Week

RALLY CAPS BACK ON... After the prior week's flat stock market performance due to the Goldman Sachs-SEC troubles at the end, this week saw investors resume their 13-month-long market rally. The Dow is now firmly in 11,000 territory, the S&P 500 passed the 1200 mark and the Nasdaq crossed over 2500.

First quarter corporate earnings certainly fueled the enthusiasm. Most of the 85 S&P 500 companies reporting beat both profit AND revenue expectations, meaning the good numbers weren't just from belt-tightening. Big stars included Amazon.com, American Express, Apple, Citigroup, IBM, McDonald's, Microsoft, SanDisk, Starbucks and UnitedHealth, all with nice Q1 earnings.

The Leading Economic Indicators (LEI) index registered its twelfth consecutive monthly gain, up 1.4% in March. The Producer Price Index (PPI) put wholesale inflation up 0.7% for March, but Core PPI, excluding volatile food and energy, was up only 0.1% for the month and 0.9% for the year. New weekly unemployment claims were down 24,000, while continuing claims dropped by 40,000. Excluding volatile transportation, Durable Goods orders were up 2.8% for the month and up 13.5% over a year ago.

For the week, the Dow ended UP 1.7%, to 11204.28; the S&P 500 was UP 2.1%, to 1217.28; while the Nasdaq went UP 2.0%, to 2530.15.

Last week's improved economic data, along with Greece's move away from disaster, hurt bond prices, which tend to benefit from weak economic developments. Investors were also looking ahead to the huge levels of supply on offer this week. The FNMA 30-year 4.5% bond we watch closed down 41 basis points for the week, at $100.09. As reported in Freddie Mac's weekly survey, national average mortgage rates stayed flat, still at historically low levels!

This Week’s Forecast

THE FED, THE Q1 GDP... The Fed meets again this week, announcing their FOMC Rate Decision on Wednesday. Even though the economy is picking up, virtually no one expects a rate hike, given Fed Chairman Ben Bernanke's recent pronouncements on Capital Hill. We'll have a new look at the economy with Advance Q1 GDP on Friday.

The only housing news comes Tuesday, with February's Case-Shiller home price index. We'll also get Consumer Confidence on Tuesday and University of Michigan Consumer Confidence on Friday. 

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 April 26 – April 30

- Week of April 19, 2010

INFO THAT HITS US WHERE WE LIVE

Friday, March Housing Starts came in above expectations, UP 1.6%, at an annual rate of 626,000 units. Throw in revisions to February and starts were UP 8.9%. Single-family starts were down a tad for the month, but for all of Q1, they were UP at a 41% annual rate versus the Q4 average. New Building Permits for March also beat estimates, UP 7.5% to a 685,000 annual rate. Some experts feel we're in the early stage of a substantial rebound in home building. And they point out that the pace of building is still slow enough that inventories can come down even as new construction increases. 

As you know, the home buyer tax credit for qualified purchases requires a signed contract by April 30 and a closing by June 30. However, for members of the military, the Foreign Service and the intelligence community who have been on official extended duty, these dates have been extended one full year -- to April 30, 2011, for a signed contract and June 30, 2011, for the closing. If you have clients in these services, please have them contact us right away to see if they meet the specific provisions to qualify for this valuable benefit.

Review of Last Week

FINE TILL FRIDAY... Right through Thursday, investors felt pretty good about the start of corporate earnings season, as the Dow soared past 11,000 for the first time in about two years. Then Friday the SEC announced civil-fraud charges against Goldman Sachs and one of its vice presidents for how they sold subprime securities. The Dow dropped 125 points but did end the week above 11,000. Goldman denies wrongdoing and some pundits say this is just the government putting pressure on Wall Street to kowtow to regulatory reform. We'll see.

As far as corporate earnings go, they pretty much justified investors' positive feelings. Intel, a bellwether for computers if not the whole tech sector, reported earnings that beat expectations and a bullish forecast. JPMorgan Chase and Bank of America bested expectations before the Goldman news spoiled the party for all the financials. Google, GE and UPS also did well with Q1 earnings.

Economic data revealed March CPI was up 0.1%, showing consumer prices are holding. Core CPI, excluding volatile food and energy, is up just 1.1% from a year ago. Consumers must be happy with prices, since Retail Sales shot up 1.6% in March and are up at an 11.7% annual rate for the last six months. Industrial Production is up at a 6.0% annual rate the last six months. Capacity Utilization is up to 73.2% for March from 68.3% last June, the fastest 9-month increase since 1984! Both the Empire State and the Philadelphia Fed indexes are also up, reflecting manufacturing growth in two key regions.

For the week, the Dow ended UP just 0.2%, to 11018.66; the S&P 500 was down just 0.2%, to 1192.13; while the Nasdaq went UP solidly 1.1%, to 2481.26.

Friday's down day in the stock market sent investors to bonds, where prices moved up nicely heading into the weekend. The FNMA 30-year 4.5% bond we watch closed strongly UP 81 basis points for the week, at $100.50. After inching up four weeks in a row, average mortgage rates fell last week, as reported in Freddie Mac's survey, and still remain at historically low levels!

This Week’s Forecast

FOCUS ON HOME SALES... The week begins with the Leading Economic Indicators Index on Monday giving us another broad read on the economy. Then Thursday brings weekly jobs data, the PPI numbers for inflation at the wholesale level and Existing Home Sales for March. Friday we wind up with Durable Goods and March New Home Sales. Q1 corporate earnings season will bring more major players reporting the data investors watch most closely.
 

- Week of April 12, 2010

INFO THAT HITS US WHERE WE LIVE 

Last week February Pending Home Sales blasted past consensus estimates. The National Association of Realtors (NEA) index was UP 8.2% for the month and UP 17.3% year-over-year!

The NEA also released an upwardly revised long-term forecast. They now project the median price for existing homes to be UP 2.7% to $177,200 for 2010, then UP 4.3% to $184,800 in 2011. They also put the median price for new homes UP 2.7%, to $221,700 for 2010, then UP 5.1% to $233,100 in 2011. Interestingly, a separate monthly survey of MLS data in 26 markets found the median for-sale price of homes UP 1.07% in March, to $263,753.

A new national Fannie Mae survey on housing attitudes revealed 65% of Americans still prefer owning a home, in spite of the economic situation we've experienced. Fannie Mae CEO Mike Williams said: "... Americans continue to value homeownership and think about their homes in ways that go much deeper than the financial investment." He further reassured us, "The public also strongly believes in the importance of upholding the financial commitment involved...even during these challenging times...."