QUOTE OF THE WEEK… “If you only care enough for a result, you will almost certainly attain it.” –William James, American philosopher and psychologist
INFO THAT HITS US WHERE WE LIVE… We all do care a lot about keeping the housing market on its steady path of recovery and last week saw more evidence of progress in that direction. An analytics and research firm that serves the industry reported home prices throughout the country were up 12.4% year-over-year in July, the 17th month in a row of annual home price growth. Another analytical company, specializing in property values, posted home prices up 10.2% year-over-year in August. They noted that the last time they saw double-digit annual home price growth was in mid-2006.
Home builders are aware of this. Private residential construction was up 0.6% in July, to its highest level since September 2008. The National Association of Realtors (NAR) forecast that existing home sales are expected to increase 10% for all of 2013, then hit 5.2 million by the end of 2014. And even with the recent rise in mortgage interest rates, the Mortgage Bankers Association reported mortgage applications up 1.3% for the week ending August 30. Economists also noted that rates now are roughly the same as they were two years ago, while housing affordability is at an all-time high.
BUSINESS TIP OF THE WEEK… Overcome your personal blind spots. Push yourself to try things that are alien to you. If you’re feeling comfortable, you’re probably not pushing yourself hard enough.
>> Review of Last Week
STOCKS UP ON BOTH GOOD NEWS AND BAD… The Dow ended its four-week losing streak, as Wall Street responded positively to developments regarding Syria, as well as to good and bad economic news, led by Friday’s disappointing Employment Report. Just 169,000 nonfarm payrolls were added in August, but June and July numbers were revised downward, so the net gain was only 95,000 jobs. The unemployment rate dipped to 7.3%, but this was again from a drop in the labor force participation rate to 63.2%, its lowest level in 35 years. But investors saw this all as good news, since the Fed may hold off on tapering its bond buying program.
There was also good economic news that actually was good. Better than expected reports came in for Initial Weekly Unemployment Claims, which dropped to 323,000. Productivity was up nicely in Q2, and ISM Services showed strong growth in that important sector. New car sales hit an annualized pace of 16.09 million vehicles, a rate not seen since before the financial crisis. Even the Syrian situation proved less worrisome to investors, who keyed on political assurances that any strike would be strategic and not require American forces on the ground.
The week ended with the Dow up 0.8%, to 14923; the S&P 500 up 1.4%, to 1655; and the Nasdaq up 2.0%, to 3660.
Decent economic data pushed bond prices down before the disappointing jobs report helped Treasuries, though not all bonds. The FNMA 3.5% bond we watch ended the week down 1.01, to $98.21. Average fixed mortgage rates edged up in Freddie Mac’s Primary Mortgage Market Survey for the week ending September 5. Their chief economist blamed it on “… signs of a stronger economic recovery. Real GDP was revised upwards to 2.5% growth.” Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information.
DID YOU KNOW?… Governments need to watch budget deficits, which are financed by government bonds. When more bonds are issued, more government revenues go to paying interest on them, instead of for productive purposes.
>> This Week’s Forecast
CONSUMERS SPENDING MORE AND SO ARE THE FEDS… This Friday, the importantRetail Sales report for August is forecast to be up, as consumer spending keeps helping the economy. But federal government spending still exceeds monies coming in, so the Federal Budget should show a deficit for August.
We also want to watch Initial Unemployment Claims, predicted to stay at their recently improved level below 350,000. The August Producer Price Index (PPI) is expected to show a very modest inflation rate for wholesale prices.
>> 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.