July 12, 2024

INFO THAT HITS US WHERE WE LIVE  Last Wednesday, January existing home sales came in down 5.3%, to an annual rate of 4.49 million. The supply went to 9.6 months, but that was all because of the slower pace of sales. In fact, the raw inventory of both single family homes and condos/co-ops DECLINED. The inventory of existing homes has now been reduced by one million homes since its peak last July. 

Thursday, new single-family home sales came in at a 309,000 annual rate, a bit slower than expected. Because of this slow pace, inventory increased to 13.3 months. But the total inventory of unsold new homes has dropped dramatically – to 341,000 homes, down 40.2% from its record peak in 2006. The new homes inventory is now below the 355,000 average of the last 25 years. 

We also saw the Case-Shiller home price index down 2% for December and down 18.5% versus a year ago. The media jumps all over this index, but it focuses on homes in major metro areas, so it isn't a true average for the country. For a truer look at the overall situation, we might want to consider the Federal Housing Finance Agency (FHFA) numbers, which concentrate on homes with conforming mortgages. Sales of these homes showed a PRICE GAIN of 0.1% in December and only an 8.7% drop from a year ago. Some experts feel many areas of the country are close to or already have hit bottom.

>> Review of Last Week

STAYING ABOVE 7000…It wasn't a great week in the markets, with the major indexes slipping just over 4%. The Dow happily stayed above 7000, a psychological victory of sorts, since both the Dow and the S&P 500 finished at 11-year lows. The week began with a low Consumer Confidence reading and ended with Friday's revised Q4 GDP of –6.2%. This was bigger than predicted and the media jumped all over "the worst GDP reading in a quarter century." They were referring to Q1 1982 GDP, which was actually –6.4%, meaning we're still not as bad off as we were in the Reagan recession.

Real disposable personal income was up 3.4% in Q4, indicating people have money, they're just hesitant to spend it. Other positive news included the Chicago PMI (Purchasing Managers Index) coming in UP over last month. This forward-looking indicator is a good si gn, as is University of Michigan Consumer Sentiment, which also came in better than expected. The most encouraging signs came from our leaders. Fed Chairman Ben Bernanke told Congress Tuesday there is a "reasonable prospect" the current recession will end this year and that 2010 will be a year of recovery. That evening, the President told a joint session of Congress, the nation and the world: "We will rebuild, we will recover and we will emerge stronger than before."

Efforts to fix the financial system included the announcement Wednesday of the administration's Capital Assessment Program. CAP will provide banks with capital in exchange for stock, if they go through a "stress test" to determine the need for those funds. Friday, the Treasury agreed to hike its stake in Citigroup to 36%.

The week saw the Dow fall 4.1%, to 7062.93; the S&P 500 went down 4.5%, to 735.09; and the NASDAQ slid 4.4%, to 1377.84.

The bad week in stocks was matched, uncharacteristically, by a bad week in bonds. Uncertainty about the cost of all the bailouts is weighing on prices. The price of the benchmark 10-year Treasury went down, so its yield, which runs counter to price, went up to 3.030%. Mortgage rates, however, remain at very attractive levels. 

>> This Week’s Forecast

GOT JOBS?… We'll find out the latest employment story in Friday's Jobs Report. Pending Home Sales will be the topic on Tuesday. AIG is supposed to announce quarterly earnings (no date yet confirmed), but no one's expecting to throw a party over that one. Other indicators will continue to scope out the economic situation.

>> 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.

>> Federal Reserve Watch    

Forecasting Federal Reserve policy changes in coming months. Economists believe the Fed is unlikely to move rates from their rock bottom level during the first half of the year. Things could change in the second half if the economy and inflation start perking up. 

Current Fed Funds Rate: 0%–0.25%

This post information was provided by: Greg Brooks southwest area manager San Diego Mortgage Network (800) 287-8292 x 225                                             San Diego homes for sale


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