QUOTE OF THE WEEK… “Don’t be afraid to go out on a limb, it’s where all the fruit is.” –Shirley MacLaine, actress and author
INFO THAT HITS US WHERE WE LIVE… It may seem like going out on a limb to predict housing will end up ahead for the year after last week’s New Home Sales report. New single-family home sales dropped 14.5% in March to a 384,000 annual rate. These sales are counted at contract signing, so some of the dip can be blamed on buyers staying home during February’s harsh weather in much of the country. More significantly,March’s median sales price for a new home was up 11.2%, the largest monthly gain ever, so potential buyers may have been put off. The report also does not count multi-family sales, such as condos.
Existing Home Sales fared better in March, dipping a slight 0.2%, to a 4.59 million annual rate. These sales are counted at closing, and severe weather in many parts of the country during January and February held down shopping that would have led to March sales. The existing homes inventory has also been tight. Happily, that inventory went up 90,000 units in March, suggesting a sales pickup in April and May. The median price of an existing home is up 7.9% over a year ago, which should bring even more homes onto the market. The February FHFA price index of homes financed with conforming mortgages is up 6.9% from a year ago.
BUSINESS TIP OF THE WEEK… If you need to make a big change to get your business back on track, experts say it’s critical to be confident, be willing to take risks, and be ready to answer critics’ objections.
>> Review of Last Week
FREAKY FRIDAY… Stocks sailed south on Friday, as the Dow dipped by a serious 140 points and all three major market indexes closed lower for the week. Wall Street watchers opined that the Ukraine situation is promoting uncertainty in the financial markets. Consequently, traders dumped stocks on Friday to take some risk off the table heading into the weekend. Sadly, no one is sure where the gamesmanship in Eastern Europe may lead. Also bothering investors were some disappointing corporate earnings reports and downward forecasts from companies about what their second-quarter results might look like.
The economic reports, however, were not that bad at all. The University of Michigan Consumer Sentiment Index for April shot to its highest level since July 2013, besting expectations. Durable Goods Orders, excluding the volatile transportation sector, were up 2.0% for the month. The Leading Economic Indicators (LEI) index and Existing Home Sales met expectations. It was only New Home Sales that missed everyone’s forecasts. Weekly Initial Unemployment claims crept up a tad, but Continuing Claims dropped by 61,000, to 2.68 million, a nice improvement.
The week ended with the Dow down 0.3%, to 16361; the S&P 500 down 0.1%, to 1863; and the Nasdaq down 0.5%, to 4076.
It was a mixed week in Treasuries, but bond prices in general benefited from the escalating uncertainties coming out of eastern Europe. The FNMA 4.0% bond we watch finished the week up .02, at $104.17. After falling two weeks in a row, nationalaverage fixed mortgage rates inched up in Freddie Mac’s Primary Mortgage Market Survey for the week ended April 24. This was blamed on the soft housing data. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information.
DID YOU KNOW?… This week’s Employment Cost Index is a measure of employee wages and benefits. As these increase, so does inflation, because employers raise prices to cover the costs. Inflation tends to drop bond prices and raise interest rates.
>> This Week’s Forecast
PENDING HOME SALES OK, GDP DIPS, INFLATION OK, JOBS GAIN, PLUS THE FED...Almost every aspect of the economy will be measured this week. The Pending Homes Sales index of contracts signed on existing homes is predicted up in March. But the Q1 GDP- Advanced reading is expected to show slower economic growth. Core PCE Pricesshould reveal inflation under control. Forecasts say the April jobs report will give us a moderate number of new Nonfarm Payrolls.
Wednesday, the Fed meets, and although the FOMC Rate won’t change, the policy statement will be scrutinized for its take on the economy. We’ll also get two important manufacturing reports, the Chicago PMI and the ISM Index, both expected to show expansion.
>> 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.