>> Market Update 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. >> Review of Last WeekMAKE THAT FOUR IN A ROW... Not everyone got an early start on the holiday break last week, as enough enthusiastic investors showed up on Wall Street to push stocks higher for the fourth week running. There were plenty of economic reports for traders to react to and the news was fundamentally positive.
The main negative note was struck with November Durable Goods Orders, which declined 1.3%, a bigger drop than expected. But that was the overall number. When you took out the volatile transportation component, orders were UP 2.4% and that was well above the gain that had been forecast. The final number for Q3 GDP was revised up from 2.5% to a 2.6% annual rate, but this was a tad less than expected. Nonetheless, the economy is expanding and the feared "double dip" recession is no longer a concern for economists.
In other good news, Personal Income was UP 0.3% in November and Personal Spending UP 0.4%. Looking at inflation, PCE prices were up only 0.1% for the month and up just 1.0% from a year ago. Core PCE prices, excluding food and energy, were up only 0.1% for the month and up just 0.8% from a year ago. This puts zero pressure on the Fed to raise the Funds Rate to head off inflation. Both initial weekly jobless claims and continuing claims dropped again, though still not to the levels they should be.
For the week, the Dow was UP 0.7%, to 11,573; the S&P 500 was UP 1.0%, to 1,257; and the Nasdaq was UP 0.9%, to 2,666. (Note: we've dropped the decimals and rounded the indexes to their nearest whole numbers.)
The bond market remained volatile. Gains earlier in the week were later given up. Nonetheless, the FNMA 30-year 4.0% bond we watch ended down only 5 basis points for the week, closing at $98.17. Freddie Mac's weekly survey of conforming mortgages had average fixed-rate mortgage rates easing slightly from their recent moves up. Rates are still historically low, but people who want to purchase or refinance should probably not drag their feet. >> This Week’s ForecastCONSUMERS GAIN CONFIDENCE... It's another four-day week of economic activity, but quieter than the one just ended. The last week of the year will give us readings in key areas. Tuesday's Consumer Confidence will tell us how hopeful people are, and that number is projected to go up a healthy two points. Manufacturing in a key region will be measured by Thursday's Chicago PMI, which is expected to remain at its current level, showing solid expansion.
The housing market will be gauged again with Thursday's Pending Home Sales for November. This is expected to be down slightly, indicating a falloff in closings for January and February. We also want to watch weekly and continuing jobless claims, which should keep dropping. The markets will be closed Friday, New Year's Eve.
We wish you and yours a Happy 2011, a healthy and prosperous New Year! >> The Week’s Economic Indicator CalendarWeaker 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 27 – December 31 Date | Time (ET) | Release | For | Consensus | Prior | Impact | Tu
Dec 28 | 10:00 | Consumer Confidence | Dec | 56.1 | 54.1 | Moderate | W
Dec 29 | 10:30 | Crude Inventories | 12/25 | NA | -5.33M | Moderate | Th
Dec 30 | 08:30 | Initial Unemployment Claims | 12/25 | 416K | 420K | Moderate | Th
Dec 30 | 08:30 | Continuing Unemployment Claims | 12/18 | 4.030M | 4.064M | Moderate | Th
Dec 30 | 09:45 | Chicago PMI | Dec | 62.5 | 62.5 | HIGH | Th
Dec 30 | 10:00 | Pending Home Sales | Nov | -1.8% | 10.4% | Moderate |
>> Federal Reserve Watch Forecasting Federal Reserve policy changes in coming months Things may be looking up a bit, but the Fed is not yet convinced. They still expect to keep the Fed Funds Rate at its super low level for an "extended period." A strengthening economy or the threat of inflation, of course, could start the rate 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 | Jan 26 | 0%–0.25% | Mar 15 | 0%–0.25% | Apr 27 | 0%–0.25% |
Probability of change from current policy:
After FOMC meeting on: | Consensus | Jan 26 | <1% | Mar 15 | <1% | Apr 27 | 2% |
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