QUOTE OF THE WEEK… “Having complete control over your own mind will allow you to manage any situation at hand. If you can maintain a positive approach, you can achieve anything.” –Tom Blandi, French literary theorist author
INFO THAT HITS US WHERE WE LIVE… The standard response from the pundits to last week’s 1.3% drop in Pending Home Sales for July could make it hard to maintain a positive approach. The typical explanation was that the drop was all due to the recent uptick in mortgage rates. But the truth is, slightly higher mortgage rates are only causing a drop in refinances. That’s because for buyers, mortgage rates are stillhistorically low and home prices remain attractive. Supporting this, the Mortgage Bankers Association Purchase Loan Index was up 2% for the week ending August 23 and is up 6% on an annual basis.
Here’s some more positive news ignored by the pundits. Even with the small monthly drop, Pending Home Sales were up 6.7% in July from the year before. In fact, they’ve now beaten year-ago levels for 27 months in a row. Those eager to report the end of the housing recovery were also disappointed to see the latest S&P/Case-Shiller Home Price Index. Home prices in 20 major metros were up 2.2% in June and are up 12.1% year-over-year. And this time around, all 20 cities posted both monthly and annual gains.
BUSINESS TIP OF THE WEEK… Social media is the new TV, so make sure your content is compelling enough to keep people’s attention. Be interesting, entertaining, add value, and you’ll be worth following.
>> Review of Last Week
SYRIA SINKS STOCKS… The possibility of a U.S. strike against Syria was the big concern on Wall Street all week. The Secretary of State’s speech on Friday dialed up the threat of a conflict, and all three major stock indexes ended down for the week.Closing out August, the Dow and the S&P 500 recorded their worst month since May 2012. But Friday was one of the lowest volume trading days this year. With skeleton crews manning the trading desks going into the holiday weekend, some analysts didn’t put too much weight on the downward moves. However, as usual, the economic reports were mixed.
University of Michigan Consumer Sentiment dipped in August, although this followed July’s six-year high. The Chicago PMI showed Midwest business activity growing stronger than predicted. Personal Income was up 0.1%, as expected, but Personal Spending, also at 0.1%, fell short of its 0.3% forecast. Durable Goods Orders and Pending Home Sales both fell in July. The second estimate of Q2 GDP was revised up to 2.5% from 1.7%. But observers didn’t feel this signaled an end to the underlying currents of weak growth, as most of the upward revision was due to a stronger trade deficit, likely to reverse in Q3.
The week ended with the Dow down 1.3%, to 14810; the S&P 500 down 1.8%, to 1633; and the Nasdaq down 1.9%, to 3590.
The threat of a conflict with Syria sparked a safety bid with investors. This drove money out of equities and into bonds, pushing prices northward. The FNMA 3.5% bond we watch ended the week up .12, to $99.22. For the week ending August 29, average fixed mortgage rates moved lower from the previous week in Freddie Mac’s Primary Mortgage Market Survey. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information.
DID YOU KNOW?… A recent report showed that if there were no housing bubble and home prices simply rose at the historic average of about 3.6% a year, they’d be almost right where they are today.
>> This Week’s Forecast
MANUFACTURING AND SERVICES GROW SLOWLY, SAME AS JOBS… The holiday shortened week should serve up more evidence of the economy recovering at its now familiar slow pace. Both ISM Manufacturing and ISM Services Indexes are forecast to show expansion for August, although at a slower rate. Friday, the August Employment Report should reveal another modest gain in Nonfarm Payrolls, not enough to drop the Unemployment Rate.
The financial markets were closed yesterday, September 2, in observance of Labor Day.