QUOTE OF THE WEEK..."Always remember that your own resolution to succeed is more important than anything else."--Abraham Lincoln.
INFO THAT HITS US WHERE WE LIVE...Our resolution to succeed in the real estate market was given a bit of a boost with the National Association of Realtors (NAR) report that existing home sales were up 8.3% in the first quarter over the fourth quarter of last year. Plus, on a quarter-to-quarter basis, sales rose in every region of the country. Year-over-year, sales were virtually flat, slipping just 0.8% to a seasonally adjusted annual rate of 5.14 million homes.
This was nonetheless balanced with some disappointing data. Year over year, existing home prices dropped 4.6% nationwide, to a median of $158,700. Median prices dropped year over year in 118 of 153 metro areas, but rose in 34 of them. This drop in median price came because more sales were in the lower end of the market. In spite of this lower price skew, first-time buyers only made up 32% of the market, versus 42% a year ago when the federal homebuyer tax credit spurred sales.
BUSINESS TIP OF THE WEEK...People like doing business with someone they can relate to. Try sharing some of your childhood or teenage experiences. The other person may bring up some of their own. Trading personal anecdotes, people feel like they've known you for years even though you've just met.
>> Review of Last Week
A BIT OFF... Like yesterday's fish, stocks didn't seem very appealing to investors who can't seem to stay confident in the economy, as the Dow and the S&P 500 dipped for another week. Sure, the tech-driven Nasdaq didn't drop, but ending flat clearly isn't very bullish. Commodities came back some and the dollar rallied. Problems included April Retail Sales which were up 0.5%, but the big gains were from service stations and supermarkets, reflecting rising gas and food prices. For consumers, inflation was up 0.4% in April and up 3.2% for the year.
Weekly jobless claims were down by 44,000, but still firmly above the 400,000 level they were under up till a few weeks ago. But earnings for S&P 500 companies in the first quarter were up an encouraging 20% compared to last year. And the total return for the S&P 500 index itself is also UP almost 20% over the last year. So stock prices are tracking earnings growth exactly. Part of that growth clearly comes from exports, which in March almost hit their all-time high of July 2008.
For the week, the Dow ended down 0.3%, at 12,596; the S&P 500 was down 0.2%, to 1,338; and the Nasdaq ended flat, at 2,828.
Mixed results in the bond market, with shorter dated maturities gaining slightly and longer ones losing a tad. Safe haven buys driven by continued Euro, Middle East and Japanese nuclear concerns were discouraged by inflation worries. The price of the FNMA 4.0% bond we watch ended the week down .10, closing at $100.04. Freddie Mac's national average rates for conforming mortgages fell once more and although some worry rates may head back up, they're now below levels of a year ago.
DID YOU KNOW?...Bricks are the oldest manufactured building material still in use. The ancient Egyptians first built with bricks over 7,000 years ago!
>> This Week’s Forecast
BUILDING NEW HOMES, SELLING EXISTING ONES...Tuesday we get a read on home building in April. Housing Starts are expected to be up a tad and Building Permits down just a smidge, indicating no major drop in activity a few months out. Thursday's Existing Home Sales are also forecast up for April, staying above the 5 million annual sales threshold.
The health of manufacturing in May is projected to be down a bit in both the New York region's Empire Index and the Philadelphia Fed index. The Leading Economic Indicators (LEI) Index is expected to be flat for April.
>> 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 May 16 – May 20
>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months...Fed Chairman Ben Bernanke maintains he sees nothing wrong with Fed policy, so some economists expect these 0%-0.25% rates to be with us until the middle of 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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