QUOTE OF THE WEEK… “We acquire the strength we have overcome.”–Ralph Waldo Emerson, American writer
INFO THAT HITS US WHERE WE LIVE… We who toil in the housing market must surely be very strong by now, having overcome some powerful forces, not the least of which has been the downward pressure on home prices. The latest evidence that pressure is letting up came with the Case-Shiller home price index, UP 0.4% for September and UP 3% versus a year ago. Nineteen of 20 metros reported higher prices not just for the month, but for the past three months! The FHFA index of prices for homes financed by conforming mortgages was UP 0.2% for September and UP 4.4% over a year ago.
New Home Sales were down 0.3% for October but are still in an up trend, 17.2% ahead of sales a year ago. The median price of $237,500 is UP 5.7% versus a year ago. The months’ supply is 4.8, near its lowest levels since 2005. The median number of months a new home is on the market before being sold is now down from 7.2 a year ago to 5.9, its lowest level in 5 years. Pending Home Sales (contracts on existing homes) also rose 5.2% in October, are up 13.2% from a year ago, and are at their highest sustained level in 5 years. Demand is definitely picking up.
BUSINESS TIP OF THE WEEK… A successful sales pitch is repetitive. Make your key point at the start, explain it in the middle, then reinforce it at the end. Studies show people trust an idea more after it’s repeated at least three times.
>> Review of Last Week
TIPTOEING ALONG THE FISCAL CLIFF… The Dow stayed above 13,000 for the second week in a row, a bit of a miracle, given investor worries about the fiscal cliff. If the recently re-elected President and Congress can’t come to agreement on deficit-reducing measures by January 1, mandatory tax hikes and spending cuts could send us off that fiscal cliff and back into recession. Market indexes went up and down, as leaders in Washington offered positive and negative opinions on whether “substantive progress,” to use one of their favorite terms, had been made.
October economic data remained mixed but mostly positive. Durable Goods orders were unchanged, but beat an expected decline. The Richmond Fed index shot into positive territory, indicating manufacturing growth in the mid-Atlantic region. New and continuing jobless claims both dipped but remain high. Personal Income stayed flat and Core PCE inflation is still in check. Finally, the second estimate of Q3 GDP was revised up to a 2.7% annual growth rate, not the 3%–4% we need, but edging closer.
For the week, the Dow ended up 0.1%, to 13026; the S&P 500 was up 0.5%, to 1416; and the Nasdaq was up 1.5%, to 3010.
Thanks to investor fears about the fiscal cliff, the safe harbor of bonds looked attractive and prices held nicely. The FNMA 3.5% bond we watch ended the week up .15, at $106.24. National average fixed mortgage rates remain down near record lows in Freddie Mac’s weekly Primary Mortgage Market Survey. Not surprisingly, the Mortgage Bankers Association reported purchase loan applications UP 3% for the week and UP 8% from a year ago.
DID YOU KNOW?… Fiscal cliff refers to the tax and spending cuts expiring on December 31. They include last year’s temporary payroll tax breaks, the 2001 and 2003 Bush tax cuts, and specific business tax cuts. New spending cuts and more taxes to fund the President’s health care reform will also go into effect.
>> This Week’s Forecast
MANUFACTURING, SERVICES, AND, OH YES, JOBS!… This week features the ISM Manufacturing and ISM Services Indexes, both expected off for November, though still above 50, showing modest growth. Somehow, American workers keep upping their output, as Productivity is forecast to rise once again in Q3.
The week closes with the November Jobs Report. This is the read that means the most to us, as employment drives housing. Unfortunately, a modest gain of 90,000 new jobs is predicted, with unemployment back up to 8.0%.
source, Guild Mortgage Company