QUOTE OF THE WEEK… “Look to the future, because that’s where you’ll spend the rest of your life.” –George Burns, American comedian
INFO THAT HITS US WHERE WE LIVE… There was additional evidence this week that the future for us will feature a continued housing recovery. A software company specializing in residential real estate information reported home prices growing strongly across the country in the third quarter. The 2.3% increase over the second quarter was the fastest home price growth they’ve seen in the current recovery. However, prices are expected to increase at a more moderate pace in the next few months as housing demand subsides during the winter.
A national online real estate database reported homes on its site sold 25.9% faster in September than a year ago. They were listed a median of 86 days, 30 days less than September 2012. Their chief economist said the demand “has been fueled by huge resets in home prices since market peak, historically low mortgage rates and a slowly improving broader economic climate.” He added, “Home shoppers in today’s environment need to be prepared to move quickly.” On the National Association of Realtors site, Realtor.com, the media age of its inventory dropped 10.6% in September, to 93 days.
BUSINESS TIP OF THE WEEK…There’s strength in solitude. Take some time by yourself to process ideas, hone your ability to think and focus, and to just be creative.
>> Review of Last Week
WHAT, ME TAPER?… Last Thursday at her Senate confirmation hearing, Fed chair nominee Janet Yellen made it clear the central bank was in no hurry to taper its bond buying to stimulate the economy. She allowed as how the program can’t go on forever, but asserted that the recovery was still too fragile for the Fed to pull its support. Those Fed asset purchases keep interest rates down and stock prices up, so investors were delighted with Yellen’s testimony, and showed it by driving the Dow and the S&P 500 stock indexes to record closes.
Thursday and Friday, soft economic data supported Yellen’s view of the recovery. The September Trade Deficit came in higher than expected, at $41.8 billion. Industrial Production and factory Capacity Utilization both dipped in October. The Empire Manufacturing Index showed contraction in the New York region in November. The Preliminary Productivity reading for Q3 was up at a disappointing 1.9% annual rate. A couple of good signs came with weekly jobless claims dropping by 2,000 and the four-week moving average down by 5,750.
The week ended with the Dow up 1.3%, to 15962; the S&P 500 up 1.6%, to 1798; and the Nasdaq up 1.7%, to 3919.
Soaring stocks slammed bonds for the most part, but Yellen’s support for the Fed’s buying program helped mortgage bonds. The FNMA 3.5% bond we watch ended the week up .88, to $101.16. Freddie Mac’s Primary Mortgage Market Survey for the week ending November 14 showed national average fixed mortgage rates edging higher again, following the prior week’s stronger than expected October jobs and Q3 GDP reports. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information.
DID YOU KNOW?… For most of the period since World War II, average annualeconomic growth has been more than 3.5%, versus the 2% range of GDP growth in the current recovery.
>> This Week’s Forecast
RETAIL UP, INFLATION OK, HOME SALES SLIP, A LOOK AT FED MINUTES… Economists are predicting a welcome return to growth for Retail Sales in October. We expect to see that inflation remained well within the Fed’s targets that month, as measured by both the CPI for consumer prices, and the wholesale PPI. But all was not perfect in October, as Existing Home Sales are forecast down a tad, although above the 5 million a year annual rate.
FOMC Minutes from the Fed’s October 30 meeting may shed further light on the question of how soon the central bank will begin to taper its bond buying program, which has helped keep mortgage rates down.
>> 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.