Another group of industry observers concluded that sales of existing homes hit bottom in July and will rebound in the fall. They based this on recent reports for purchase mortgage applications and pending home sales, which track signed purchase contracts for existing homes.
The fact remains, homes are now more affordable for more people than they've been in years. And today's historically low mortgage rates make monthly payments much easier to work into the family budget. Prices may have bottomed out indeed. The S&P/Case-Shiller Home Price Indexes show that nationally, home prices are 3.6% above levels a year ago. For buyers who expect to live in their home a while, many observers feel this is clearly a very smart time to purchase.
>>>> Review of Last Week
UP YET AGAIN... For investors on Wall Street, positive feelings continue to prevail over negative vibes and uncertainties, as stocks closed higher for the third week in a row. All the major market indexes were up, with the extra strength of the tech sector pushing the Nasdaq up well over 3%. In addition, all three indexes are now UP for the year.
Worrying investors, and everyone, were things like Thursday's report that the U.S. poverty rate was at a 16-year high. Other data showed that real median household income last year was essentially unchanged over 2008. No surprise then that Friday's University of Michigan Consumer Sentiment Index came in at its lowest level since August a year ago. The day before, the Producer Price Index reported wholesale inflation a bit higher than anticipated, which got some analysts concerned that consumers might see price hikes next.
Those fears were quelled Friday with Consumer Price Index (CPI) readings that had inflation well under control at the retail level. And the 1.1% year-over-year gain in the CPI showed that those who feared deflation have nothing to worry about for now. Other encouraging signs included a rise in Industrial Production for August that met expectations and August Retail Sales that beat forecasts, evidence that consumers may be worried, but they're still spending!
For the week, the Dow ended UP 1.4%, to 10607.85; the S&P 500 was UP 1.4%, to 1125.59; and the Nasdaq was UP 3.3%, to 2315.61.
It was another mixed week in the bond market, but prices held up enough. The FNMA 30-year 4.0% bond we watch ended a mere 5 basis points ahead for the week, closing at $102.09. National average mortgage rates continue at historically low levels, though some observers do expect them to move up a little by the end of the year.
>>>> This Week’s Forecast
WOO-HOO, HOUSING AND THE FED!... This week features our two favorite topics. The Fed's an easy forecast, as virtually no one breathing thinks they'll hike the Funds Rate at their meeting on Tuesday. As usual, however, their policy statement will bear scrutiny, as analysts look for signals that the rate could rise any time soon.
Tuesday's August Housing Starts should finally show a slight uptick in activity. August Building Permits are also expected to be up a little, even though home builders remain cautious. Some experts feel we're starting to turn the corner in housing, as a bit of growth is predicted in Thursday's August Existing Home Sales and Friday's August New Home Sales.
>>>> 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.
Economic Calendar for the Week of September 20 – September 24
>>>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months Last week's Consumer Price Index report showed inflation still under control. So with economic growth slowing, economists overwhelmingly believe the Fed will keep rates where they are at this week's FOMC meeting and well into next year. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.
Current Fed Funds Rate: 0%–0.25%:
Probability of change from current policy:
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