>> Market Update INFO THAT HITS US WHERE WE LIVE Last Wednesday the National Association of Realtors reported the median price of existing single-family homes UP for Q2 in two thirds of U.S. metropolitan areas, or100 markets. This compares with only 26 markets with price gains in the same quarter a year ago. Experts say these figures show the federal tax credits helped stabilize home prices in the first half of the year. Nationally, the median price for single-family homes increased to $176,900 in Q2, UP 1.5% from a year ago.
The NAR also reported sales of existing single-family homes and condos for Q2 were UP 9.1% over Q1, hitting an annual rate of 5.61 million. That number is UP 17.3% from Q2 a year ago. With the tax credit gone, the NAR is forecasting a Q3 sales drop to a 4.55 million annual rate. But they do see sales coming back in the last three months of the year, to a 5.27 million unit annual rate. The NAR's chief economist added: "Prices in some areas remain below replacement construction costs, so even with an elevated supply of existing homes...we don't expect any consequential movement in home prices for the foreseeable future."
Freddie Mac's weekly survey showed mortgage rates staying at record low levels for conforming loans. But demand for purchase loans has dropped after the tax credit expiration, according to the Mortgage Bankers Association. >> Review of Last Week DIPPY... It was a week of "double-dip recession" fears, but when all was said and done, the economic recovery continued, albeit at a slower pace. The only dipping that occurred happened on Wall Street, as investors' worries sent the Dow Industrials down 265 points on Wednesday. By the time the markets closed Friday, all three major indexes had truly dipped -- from 3% to 5% for the week.
That Wednesday dip in the Dow was the delayed reaction to the results of the Fed meeting on Tuesday. The central bank kept the rate down at 0%–0.25%, but their policy statement raised investors' "double-dip" worries. The Fed said the economy isn't as strong as they thought it would be two months ago and they would begin buying Treasury bonds "to support the economic recovery." But in spite of Wall Street's jitters, the real economic data wasn't so bad.
Preliminary Q2 Productivity slipped a tad, but it's UP 3.9% over last year. The trade deficit in June grew more than expected, but exports dropped only slightly and are UP 17.7% for the year, a healthy sign for American companies. July Retail Sales were up less than expected, but when May and June upward revisions were included, the numbers beat expectations, UP 0.7% overall and UP 0.2% excluding autos. And those talking up a global double-dip recession were quieted when Germany's Q2 GDP showed a 2.2% expansion from the previous quarter, that country's fastest growth in two decades.
For the week, the Dow ended down 3.3%, to 10303.15; the S&P 500 was down 3.8%, to 1079.25; and the Nasdaq was off 5.0%, to 2173.48.
With investors seeking safety, the bond market benefited, with a big focus on Treasuries after the Fed's comments on Tuesday. The FNMA 30-year 4.0% bond we watch ended essentially flat for the week, down a scant 6 basis points, closing at $102.69. As noted above, national average mortgage rates remained in historically low territory for the eighth week in a row. >> This Week’s Forecast HOME BUILDING, MANUFACTURING, LEADING INDICATORS...This week we see how home builders feel, with Tuesday's Housing Starts and Building Permits. Starts are forecast to be up, though permits are expected to slide a little from last month. There are some important reads on manufacturing beginning with Monday's Empire State Index, Tuesday's Industrial Production and Capacity Utilization numbers, and Thursday's Philadelphia Fed Manufacturing Index. All are expected to be up, along with the Leading Economic Indicators (LEI) Index, out the same day. No double dipping here.
Key Q2 corporate earnings reports will come from Deere, Dell, Home Depot, Lowe's, Target, and Wal-Mart. >> 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 August 16 – August 20 | Date | Time (ET) | Release | For | Consensus | Prior | Impact | | M
Aug 16 | 08:30 | NY Fed – Empire State Manufacturing Index | Aug | 7.5 | 5.1 | Moderate | | Tu
Aug 17 | 08:30 | Housing Starts | Jul | 555K | 549K | Moderate | | Tu
Aug 17 | 08:30 | Building Permits | Jul | 573K | 586K | Moderate | | Tu
Aug 17 | 08:30 | Producer Price Index (PPI) | Jul | 0.2% | –0.5% | Moderate | | Tu
Aug 17 | 08:30 | Core PPI | Jul | 0.1% | 0.1% | Moderate | | Tu
Aug 17 | 09:15 | Industrial Production | Jul | 0.6% | 0.1% | Moderate | | Tu
Aug 17 | 09:15 | Capacity Utilization | Jul | 74.5% | 74.1% | Moderate | | W
Aug 18 | 10:30 | Crude Inventories | 8/14 | NA | –2.99M | Moderate | | Th
Aug 19 | 08:30 | Initial Unemployment Claims | 8/14 | 475K | 484K | Moderate | | Th
Aug 19 | 08:30 | Continuing Unemployment Claims | 8/7 | 4.500M | 4.452M | Moderate | | Th
Aug 19 | 10:00 | Leading Economic Indicators (LEI) | Jul | 0.2% | –0.2% | Moderate | | Th
Aug 19 | 10:00 | Philadelphia Fed Manufacturing Index | Aug | 7.5 | 5.1 | HIGH | >> Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months At last week's meeting, the Fed made no changes to its pledge to keep rates "exceptionally low" for an "extended period." Many economists now think the Fed Funds Rate will stay at its current super-low level well into next year. 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 | | Sep 21 | 0%–0.25% | | Nov 3 | 0%–0.25% | | Dec 14 | 0%–0.25% |
Probability of change from current policy:
| After FOMC meeting on: | Consensus | | Sep 21 | <1% | | Nov 3 | <1% | | Dec 14 | <1% | |
