Keeping you updated on the market!
For the week of
March 8, 2010
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MARKET RECAP We warned last week that weather could play a role in the upcoming week's housing data. Sure enough, it did. In fact, the sometimes harsh, if not at least irritating, weather did a number on pending home sales for January, sending them into a 7.6% decline compared to December. Regionally, the biggest decline occurred in the West, where pending sales declined 13.2%; followed by the Midwest , with an 8.9% decline; the Northeast, with an 8.7% decline; and the South, with a 2.1% decline. The positive takeaway from the pending sales data is that activity in all regions remains significantly higher compared to year-ago levels. A more positive takeaway could be found in Clear Capital's Home Data Index, which showed that home prices climbed 5% nationally in February from a year ago, despite growing concerns of a possible swamping of the market with REO and foreclosed properties. The 5% uptick follows January's 2.3% increase. Clear Capital's data also suggest that the price increases that occurred in the second half of last year are sticking, with prices holding unchanged on a rolling quarterly comparison. But the best takeaway last week was found in the Bureau of Labor Statistics' employment report, which showed that the unemployment rate held at 9.7%. Yes, payrolls decreased by 36,000 in February, but that's actually good news, considering the median estimate was for a 68,000 decrease. In short, the economy is making incremental employment gains, leading us to believe the worst is over for unemployment and that steady gains in employment should soon be the norm. The mortgage-rate market is another story. We've been saying for the past few months that this is about as good as it gets, and that has been the case. Rates have held remarkably steady and, of course, low, but they haven't gone lower, and it's unlikely they will. At least that's our opinion, even though two Federal Reserve presidents remarked last week that interest rates will need to remain low for the economy to recover. That might be true, but it's worth considering that if the economy is already recovering, inflation will become a looming issue, which could push rates up sooner rather than later. Bottom line: we still think locking in a mortgage rate today remains the safest, smartest bet. . |
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Economic Indicator |
Release Date and Time |
Consensus Estimate |
Analysis |
|
Mortgage Applications |
Wed, March 10, |
None |
Important. Stable low rates have re-ignited interest in both refinance and purchase markets. |
|
Wholesale Trade Sales |
Wed, March 10, |
0.8% |
Important. Business activity continues to buck the trend, which suggests growing activity on the consumer side. |
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International Trade |
Thurs, March 11, |
$40.3 Billion (Deficit) |
Moderately Important. Rising energy costs continue to push the deficit higher, but should have no impact on dollar value or interest rates. |
|
Retail Sales |
Fri, March 12, |
0.2% (Increase) |
Important. Sales growth has slowed in recent months due mostly to weather. |
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Consumer Sentiment |
Fri, March 12, |
73.5 Index |
Moderately Important. Sentiment remains fickle but continues to improve. |
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Business Inventories |
Fri, March 12, |
0.2% (Increase) |
Moderately Important. Record low inventories could spur business activity in coming months. |
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Don't Expect Too Much From Tax Credits
We are speaking of the federal homebuyer tax credits, in particular, which seem to be invoked as the blanket explanation for anything that does or doesn't happen in the housing market. We were more circumspect than most of their ability to sustain any market rally after being extended and embellished in November. That appears the case today. Credits are good at pushing demand forward, but not so good at sustaining demand over time. We've also been circumspect over the ability of low interest rates to keep things moving forward in perpetuity. To be sure, low rates matter and low mortgage rates make more homes more affordable to more people, but it's still a matter of taking on new debt with a home purchase or lower-cost debt with a refinance. The only way debt can be serviced is with income, usually a job. It's really all about employment at this point. Fortunately, the news is improving on that front based on the past three months of employment data. Things might be moving slower than we'd like, but for potential borrowers, that's actually good news. When employment shifts into gear, interest rates are likely to follow. So, we've said it before, but we'll say it again: improving employment, low mortgage rates, and stabilizing home prices (which, by the way, we think will remain stable, even with the REO and foreclosure overhang) coupled with soon-to-expire tax credits suggest to us that now is not the time to procrastinate. If you are looking in Riverside or San Bernardino County in California, go to my website at www.TeamHomeSales.com and you can search for homes at your leisure. |
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