Economic Week In Review

26. April 2008 by Burbank Real Estate.

• Exisiting Home Sales dropped 2% in March. The bad news was that housing supplies increased to 9.9 months, up .3 from the February number of 9.6. Median prices were up 2.5% to $200,700, but is down 7.7% as compared to the median price in March 2007. State Street Investor Confidence Index dropped to 72.8 from 77.2. Bank of Canada Announcement The bank cut it’s key interest rate 50 basis points, as expected, to 3%. Our Fed Funds rate is at 2.25%.(Tuesday)

• Jobless Claims, came in at 342,000, dropping an unexpected 33,000. No one seemed too thrilled as one week’s data is hardly a trend, but let’s see what next week’s numbers bring. Durable Goods Orders continued to decline in March, mainly in the transportation sector, ie motor vehicles. New Homes Sales fell 8.5%, worst showing since 1991. But even worse was the year over year decline of 36.6%, worst since 1981. The downward trend continues reflecting the rough environment for builders. Help Wanted Index 19 versus last reading of 21. This number indicates less help wanted advertisements which of course translate into fewer available jobs. (Thursday)
• Consumer Sentiment at 62.6 this reading is at it’s lowest point since the 1980’s. Not surprising given the increased cost of gasoline, groceries etc.(Friday)

• Bonds…2 year 2.41%, 5 yr. 3.18% and the 10 yr. 3.87%, quite a bit higher than last week, again.
• Crude oil finished at $118.52 per barrel.

Of note this week:

The unexpected dip in Consumer Confidence and the continued increase in oil prices continue to plague consumers and the markets.

The housing numbers and the continuing trend towards higher rates, in just a couple of weeks we’ve seen the 10 year go up by 37 basis points. Not so good for those hoping to get mortgages close to the lows, in fact the 30 year fixed average went above 6% this week.

Couple the higher rates with the tightening of lending standards and I think we may continue to see weakness in the housing sector. Again I will issue my disclaimer that each area is quite different and will experience variations from the averages, hence the use of the term “averages”.
Next week will focus on the FOMC Announcement, New Home Sales and Durable Goods Orders.

The Economic Week Ahead:

• (Monday)

• Consumer Confidence , FOMC Meeting Begins(Tuesday)

• FOMC Announcement,NAPM Chicago Index , MBA Purchase Applications, GDP, Employment Cost Index(Wednesday)

• ISM Manufacturing Index , Personal Income and Outlays , Jobless Claims (Thursday)

• Employment Situation(non-farm payrolls)(Friday)

Have a great weekend!

Posted in Housing Information/Stats, Blogroll | Print | No Comments »

Economic Week In Review

18. April 2008 by Burbank Real Estate.

• Retail Sales came in +.2%, better than the unchanged number they were expecting. Given that most of this increase came from sales at gas stations, I’m not really sure how you can put a positive spin on it. Business Inventories came in as expected at .6%. Many were hoping to see these shrink as it would indicate consumers are doing more buying.(Monday)

• Producer Price Index the markets were excited without food and energy it only rose .2%, with food and energy it rose by a stellar 1.1%, but really folks, I think it’s time we start looking at the entire picture. Housing Market Index was unchanged at 20, which would point to some stabilization in the housing market.(Tuesday)

• Consumer Price Index came in as expected. Housing Starts both starts and permits weakened, starts, down 11.9% for the month and down 36.5% year over year, posted one of their weakest readings since the 1991 recession. Building Permits, fell 5.8%. Industrial Productionwas slightly higher than expected.(Wednesday)

• Jobless Claims, came in at 372,000, a bleak reading for the overall economy as job strength will be a key component to a recovery. Leading Indicators came in at .1% giving rise to the notion that the economy is just flat and not in a recession. Given the overall picture I’m not sure I would agree with this assessment. I think it’s a very subjective picture depending on where you live or how you have been personally impacted by $4 per gallon gas, job losses, foreclosures etc. (Thursday)

• Bonds…2 year 2.13%, 5 yr. 2.89% and the 10 yr. 3.70%, quite a bit higher than last week.
• Crude oil finished at $116.75 per barrel.

Great gains for stocks this week following a spate of dismal earnings reports from financial institutions. Citigroup announced a $5.1 billion dollar loss and is cutting 9,000 more jobs, but because this was not as bad as some analysts were predicting, the market rallied. Google and Caterpillar announced profitable earnings, which also boosted the market. Remember the market tries to predict what is going to happen and I think people are looking towards a recovery later this year. So far for the 1st quarter, 58% of the 100 companies in the S&P 500 reporting earnings have come in above analysts expectations.

But despite this rosy picture I have to believe that the rising cost of gasoline, which impacts just about everything, will start to rear it’s ugly head in 2nd quarter earnings.

Next week will focus on Existing Home Sales, New Home Sales and Durable Goods Orders.

The Economic Week Ahead:

• (Monday)

• Exisiting Home Sales, State Street Investor Confidence Index, Bank of Canada Announcement(Tuesday)

• (Wednesday)

• Jobless Claims, Durable Goods Orders, New Homes Sales, Help Wanted Index(Thursday)

• Consumer Sentiment(Friday)

Have a great weekend!

Posted in Blogroll | Print | No Comments »

Making Sense Of The Housing Market!

14. April 2008 by Burbank Real Estate.

There’s plenty of bad news out there and I think it’s important to sift through the slate of negativity in order to understand what’s really going on. If you are looking to buy or sell a home, is this the right time?

First let’s look at some of the recent facts:

• A report by Equifax and Moody’s Economy.com.shows that 4.46 percent of mortgages were at least 30 days past due at the end of the first quarter, up from 3.98 percent in the fourth quarter and up 2.9 percent from a year earlier.

• The national foreclosure rate rose to 1.39 percent, from 1.08 percent at the end of 2007 and 0.58 percent a year earlier.

• Increases in mortgage delinquencies and foreclosures, again nationally, were the largest since 2000, when the firms began collecting this type of data. Major contributors are rising unemployment, 80,000 jobs lost last month, according to the Labor Dept., and falling home prices.

• Pending home sales in February fell 1.9% nationally, although here in California they rose 2.1%, once again bringing home the point that real estate is quite area specific.

What makes this time around so interesting and much more challenging is that the Fed has shaved 3% points off bank borrowing costs, but the average fixed rate has only dropped by ½ % to 5.85%. Back in 2000, last time home sales fell year over year, interest rate cuts saved the day. In 2001 the Fed cut rates 11 times by 4.75% and average fixed rates fell to a record low of 5.21%. My guess is that the average 30 year fixed rate will have to fall more before it starts to make an impact. If you are waiting for the Bush FHA Plan to save the day, I would not start to celebrate just yet. Here are the primary particulars of the plan:

• Relaxes eligibility standards for government-backed loans
• “Encourages” lenders to forgive a portion of mortgage debt so that homeowners could refinance.
• Subprime borrowers who cannot afford their loans and have missed two or three mortgage payments would be eligible for FHA assistance.

This plan appears to do little for the majority of borrowers who are in trouble and I think lenders will need much more than encouragement to forgive mortgage debt. When was the last time your bank let you slide on a debt of $50,000 or more?So where does that leave us? The reality is that you need to look at each area specifically. Are jobs leaving your area? Does your area have many subprime borrowers who are in over their heads? Do you have many buyers on the sidelines who are able to qualify for a loan? What’s the median price for a home? Etc.Each city will weather this downturn differently and it’s important to know the health of the local economy before assuming your area’s home prices will continue to fall.

Having said all of this, if you are a buyer waiting for the recession to pass before getting into the market, you might not want to wait too long. According to Clive Granger, winner of the 2003 Nobel Prize in Economics and professor emeritus at UC San Diego, says the

U.S. economy has been in a recession for about four months. He expects the current recession to last an additional 2-6 months, depending on what occurs in the housing and financial markets. That prediction would put us in a recovery in 2009. If that’s the case your bargain basement prices will not be around for long, especially if lending institutions start to work with borrowers.

Posted in Housing Information/Stats, Blogroll | Print | No Comments »

Economic Week In Review

12. April 2008 by Burbank Real Estate.

• Consumer Credit-slowed substantially in February, $5.1B v.$10.3 in January.

• Pending Homes Index-outlook for the housing sector worsened as existing home sales fell 1.9% in February. Given the slowdown in the job market I would say this number will continue to look grim in areas where job losses are the heaviest.
• FOMC Meeting Minutes- Most downbeat in a while as the Fed said that fighting a recession is it’s number 1 priority but fighting inflation is just as important. Economic growth forecasts were lowered, but the Fed sees a recovery in the second half of 2008. I’m not holding my breath on this forecast as they have been trailing what’s really happening by a good margin!

• International Trade -This figure worsened which is indicating that the first quarter was weaker than the forecasts. The area this points to is a weakening in the manufacturing sector.
• Chain Store Sales-another dismal month for the retailers, not surprising considering the challenges families are facing.
• Jobless Claims -Claims were less than expected which was good for stocks.

• Import/Export Prices-Surged 2.8%, not surprising considering the weakness in the dollar. What this basically says is that we’re paying more for foreign goods.
• Consumer Sentiment-Consumer sentiment tanked as inflation continues to plague the average consumer.

• Bonds…2 year 1.74%, 5 yr. 2.50% and the 10 yr. 3.50%.
• Crude oil finished at $110.14 per barrel.

Wow, the GE announcement certainly shattered what would have otherwise been considered a calm week of sideways trading. Ge is considered a bellwhether stock and a shortfall announcement will be seen as a possible precursor to future bad news from other financial companies. The Dow finished the day down 257 points(2%) to close at 12325. The S&P 500 index also declined 2% to 1333 and the Nasdaq fell 2.6% to 2290. GE announced that 1Q earnings fell 8%, to 44 cents per share missing the consensus of 51 cents per share. This is significant in that their revenues increased by 8% in the same period. Most of the havoc was caused by the financial business although they also noted that their industrial and healthcare divisions took a hit.

Consumer credit was interesting in that it slowed, which reflects the slowdown in retail sales but also prompts one to ask if now that people are facing a challenging financial environment they will be using their credit cards to pay non-discretionary bills. I would argue that this is already happening.

I need to add that I’m really just reporting the numbers, not trying to appear grim. I think that the good news in all of this is that a year from now we should be looking at a much different and hopefully improving picture. So don’t wait on the sidelines too long is you are looking to buy because the buyers market will be a thing of the past in the not too distant future.

Between the GE announcement and more first quarter disappointments there is a fear of an extended economic slowdown. Next week will prove interesting as we have many important reports due out:

The Economic Week Ahead:

• Retail Sales, Business Inventories(Monday)

• Producer Price Index, Housing Market Index(Tuesday)

• Consumer Price Index, Housing Starts, Building Permits, Industrial Production(Wednesday)

• Jobless Claims, Leading Indicators(Thursday)

• (Friday)

Have a great weekend!

Posted in Economic Market Reports, Blogroll | Print | No Comments »

Economic Week In Review

4. April 2008 by Burbank Real Estate.

 

• NAPM Chicago Index showed a slight jump in orders, which was positive, but also showed a jump in prices, probably due to rising fuel prices.
• Motor Vehicle Sales were weak, lowest rate since 1996, Construction Spending was down but better than expected and ,ISM Manufacturing Index continued to slip and new orders are down.
• Challenger Job Cut Report, reported heavy job cuts in the government, financial and transportation sectors. Factory Orders fell more than expected .
• Monster Employment Index, rose slightly and Jobless Claims, posted worst numbers since Hurricane Katrina in 2005.
• Employment Situation(non-farm payrolls), much worse than expected as 80,000 jobs went away versus the expected 50,000..
• Bonds…2 year 1.82%, 5 yr. 2.62% and the 10 yr. 3.47%.

Between recession talk from Federal Reserve Chairman Ben Bernanke and the worst jobs report since 2003 it’s not looking pretty. At this point I’m not trying to be pessimistic at all, but you have to admit that the overwhelming evidence supports the fact that we are and have been in a recession for at least a few months.

I’m concerned in that a huge number of adjustable rate mortgage resets are still due to happen this year. You have several scenarios that can play out and one of them, due to the current environment of low rates, is that the resets will not be as bad as anticipated, in which case we just may be postponing the pain. Borrowers should use this time to see if they can negotiate new terms or refinance at a fixed rate. So far I’m not hearing warm and fuzzy stories about lender cooperation or major relief from the FHA. We’ll have to see what plays out if the number of short pays/foreclosures increases, which will probably be the case.

If you are looking to purchase a home, start your search, I think there will be some great deals going forward. If you own your home and have a neg am loan, start exploring your options…..a good place to start is Mortgage Town, sponsored by the National Consumer’s League, a nonprofit that educates consumers on a variety of issues.

The Economic Week Ahead:

• Consumer Credit(Monday)

• Pending Homes Index, FOMC Meeting Minutes(Tuesday)

• (Wednesday)

• International Trade, Chain Store Sales,Jobless Claims(Thursday)

• Import/Export Prices, Consumer Sentiment(Friday)

Have a great weekend!

Posted in Economic Market Reports, Blogroll | Print | No Comments »