Prescott Real Estate News Blog's purpose is to keep current, past, and potential clients apprised of the real estate market conditions for the Prescott, Arizona Area. National and state news and events will be posted but special emphasis will be placed on Prescott Area and the Yavapai County - Prescott, Prescott Valley, Chino Valley, Dewey and Kirkland/Skull Valley.
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Economic Highlights for the Week Ending June 25, 2010
MONDAY, June 21st
The People's Bank of China announced over the weekend that it will end the yuan's peg to the dollar allowing the exchange rate increased flexibility. The announcement came a week before the G 20 summit in Toronto where China was expected to face criticism for undervaluing the yuan. As the yuan rises gradually, more expensive imports from China would result in inflation here and abroad. There is also speculation that China could substantially reduce its purchases of U.S. Treasuries. Inflation combined with softer demand in the bond market would lead to much higher interest rates.
TUESDAY, June 22nd
Existing home sales declined 2.2% in May to an annual rate of 5.66 million units, compared to expectations for a large increase to a rate of 6.20 million units. Existing homes sales are tallied when the transaction closes so economists were expecting a significant lift in the number of closings in May that would have been driven by the tax-credit. As of this date, contracts that were signed by April 30 need to be closed by June 30 to qualify buyers for the tax credit, although Congress is considering an extension of the closing deadline. The pullback in existing home sales was expected but not this soon. Hopes are that the pullback will be minimal and that sales gains will be back in the next few months.
WEDNESDAY, June 23rd
The MBA mortgage applications index fell 5.9% to 621.2% for the week ending June 18. The purchase index slipped 1.2% on the week as the refinance index tumbled 7.3%. Contract mortgage rates fell with the 30-year fixed rate down 6 basis points to 4.75%. Because of sub-5.0% interest rates refinancing applications have increased 51.5% since the end of April despite last week's decline and account for nearly 74% of all applications.
New home sales declined 32.7% in May to an annual pace of 300k, the lowest level on record since the data started being tracked in 1962. No doubt the expiration of the homebuyer tax credit on April 30 impacted May sales to the downside. The housing market in total needs the solid fundamentals of economic, job and income growth to take over where tax incentives left off. The recovery’s progress remains slow so it could be some time before strong demand returns.
The FOMC maintained the target for the fed funds rate at a level of 0% to 0.25% at the conclusion of their two-day policy setting session today. Given slow improvement in the economy and subdued inflationary pressures, policymakers believe they will keep the target low for an extended period of time. The FOMC would like to see some staying power in the recovery, further job growth and lower unemployment before removing accommodative monetary policy. It could be next year before the Fed begins raising rates.
THURSDAY, June 24th
Jobless claims fell 19k to 457k for the week ending June 19. Even with the drop last week, initial claims for unemployment insurance remain stubbornly high indicating a slump in recent labor market improvements. These data suggest another disappointing employment report for June.
FRIDAY, June 25th
The consumer sentiment index rose to 76.0 in June from a reading of 73.6 in May. The current level of sentiment, while improved, does suggest that consumers remain cautious. An optimistic index level of 100 or more will likely come when robust job creation returns and home prices stabilize.
GDP was revised in the third and final estimate to show a growth rate of 2.7% in the first quarter, down from an earlier estimate of 3.0%. Details in the data suggest the quarter ended on a weak note. Economic releases so far in Q2 suggest that economic growth will be close to the Q1 pace of 2.5% to 3.0%.
Stock Market Close for the Week
A Week Ago
-306.83 or -2.94%
-86.32 or -3.74%
WEEK IN ADVANCE
With the economic recovery largely dependent on job creation, the June employment report due out on Friday becomes all the more important to the outlook. The data in the coming week is expected to show some cooling in economic activity in June with a 120k net decline in payrolls.
Key Interest Rates
6 Mos Ago
1 Yr Ago
11th District COF
30-Year Treasury Bond
30-Yr Fixed (FHLMC)
15-Yr Fixed (FHLMC)
1-Yr Adj (FHLMC)
6-Mo Libor (FNMA)
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
Upward pressure on interest rates Downward pressure on interest rates No pressure to change interest rates News worthy