QUOTE OF THE WEEK… “Appearances are often deceiving.” –Aesop, Ancient Greek storyteller
INFO THAT HITS US WHERE WE LIVE… To some pundits and the mainstream media, March Housing Starts appeared disappointing: up a tepid 2.8% for the month and down 5.9% versus a year ago. But a closer examination of the report shows those headline numbers are deceiving. The low monthly number was all due to a drop in always volatile multi-family starts. Single family starts were up a strong 6.0% in March and are up 9.1% over the last two months. The 5-month moving average is the highest since July 2008. Plus, the number of homes under construction (started but not finished) is up 21% over a year ago!
Reflecting this activity, the National Association of Home Builders (NAHB) April confidence index was up one point from March. Some analysts expect steady gains here, as the spring selling season picks up steam. We also saw construction employment, on the increase since June 2011, up 2.6% year over year in February. More evidence of a spring pickup came when the National Association of Realtors (NAR) reported March listings on realtor.com were up 9.5% from a year ago. In addition to better selection, buyers get more time to decide. The median age of inventory was 102 days.
BUSINESS TIP OF THE WEEK… Stop doing so much! Look for ways to cut busy work. Group small tasks and do them during down time. Or outsource peripheral chores at a cost that’s less than what you make working on your core business.
>> Review of Last Week
UP!… In the real world, what goes up must come down. On Wall Street, what goes down must come back up. So after the prior week’s miserable performance, stocks last week shot up strongly. The S&P 500, in fact, enjoyed its best weekly gain since July 2013. Part of the investor optimism came from the EU, Russia, the U.S., and Ukraine making new efforts to resolve their differences. There was also some worthwhile economic data. Initial and continuing jobless claims both topped forecasts, while the Philly Fed manufacturing index almost doubled estimates.
The rest of the reports were mixed. Industrial Production and Capacity Utilization bested expectations, while Retail Sales grew nicely in March. But Business Inventories and NY Empire Manufacturing disappointed, and Housing Starts and Building Permits were not as strong as forecast. The Fed Beige Book of observations from around the U.S. posited that “economic activity increased in most regions of the country since the previous report.” Nonetheless, Fed Chair Janet Yellen told The Economic Club of New York that the central bank remains committed to an accommodative policy, meaning super low rates.
The week ended with the Dow up 2.4%, to 16409; the S&P 500 up 2.7%, to 1865; and the Nasdaq up 2.4%, to 4096.
There was heavy selling of Treasuries, and bonds in general suffered as both the U.S. economy and the Ukraine crisis showed signs of improvement. The FNMA 4.0% bond we watch finished the week down .05, at $104.15. Yet national average fixed mortgage rates fell for the second straight week and hit a six-week low in Freddie Mac’s Primary Mortgage Market Survey for the week ended April 10. This of course helps affordability in the spring selling season. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information.
DID YOU KNOW?… Rents are considered affordable when monthly rent and utilities are under 30% of household income. Harvard reported earlier this year that more than half of all U.S. renters have unaffordable housing situations.
>> This Week’s Forecast
UP, DOWN, AND SIDEWAYS... This week’s economic data is expected to head in all three directions. March Leading Economic Indicators and New Home Sales should trend upward. Existing Home Sales for March and the Michigan Consumer Sentiment – Final read for April are both predicted to remain the same. But March Durable Goods Orders are expected down a bit. Initial and Continuing Unemployment Claimsare forecast up, though that’s a downward trend in jobs.
>> 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.