QUOTE OF THE WEEK..."Problems are the price of progress."--Charles F. Kettering, American inventor
INFO THAT HITS US WHERE WE LIVE...Last week included both problems and progress in the housing market. Getting the probs out of the way, June Existing Home Sales came in down 0.8% versus May, to an annual rate still below 5 million units, lifting the months' supply to 9.5. But all the sales decline was from condos and coops, single-family sales staying the same. We appear to be bouncing along a bottom, as the median price of an existing home rose for the month and is now up 0.8% from last year. Average prices are up 2.7% versus a year ago.
But strong progress could be seen in the new homes market, as June Housing Starts were UP 14.6%, with gains occurring in all major regions. Multi-family starts, which are very volatile month-to-month, were up strongly, but so were single-family starts, UP 9.4% over May, while new building permits were UP 2.5% for June. Lastly, the Mortgage Bankers Association reported purchase loan demand was stronger than at the same time a year ago.
BUSINESS TIP OF THE WEEK...Logic will take you from Point A to Point B, but imagination can take you everywhere. Be rational when you must, but also take time to let your imagination lead you to new ways to serve clients and expand your work.
>> Review of Last Week
IT'S ALL GREEK TO WALL STREET...European leaders finally agreed on a Greek bail out, which sent stock prices skyward on Wall Street, posting a better than 2% gain for the broadly based S&P 500. The Euros also got serious about controlling the risk of contagion, coming up with longer term loans at lower interest rates for countries in need. The risk has been reduced for U.S. banks holding European bonds and the European Union seems likely to survive. Phew.
On our side of the pond, Washington politicians still couldn't come to agreement on raising the debt ceiling, but the deadline isn't until a week from tomorrow, so investors are not yet concerned. The really positive vibe came with Q2 corporate earnings. About 20% of S&P 500 companies reported and around 75% of them beat estimates, including IBM, Johnson & Johnson, AT&T, Coca-Cola and Microsoft. The star was Apple, which posted its best quarter ever.
For the week, the Dow ended UP 1.6%, to 12681; the S&P 500 was UP 2.2%, to 1345; and the Nasdaq was UP 2.5%, to 2859.
Thursday's Greek bailout spurred bond selling. U.S. debt ceiling squabbles didn't help bonds either, although this may change as the August 2 deadline approaches. The FNMA 4.0% bond we follow ended the week down .06, at $100.22. National average mortgage rates hardly moved for the week, staying near their lows for the year, according to Freddie Mac.
DID YOU KNOW?....GDP, or Gross Domestic Product, is the total market value of all final goods and services produced in a country in a given year. It includes total consumer, investment and government spending, plus the value of exports, minus the value of imports.
>> This Week’s Forecast
NEW HOME SALES, PENDING HOME SALES, CONSUMER HEADSET, GDP...Tuesday's June New Home Sales are forecast a tick up from the prior month, but Thursday's June Pending Home Sales are predicted down. Also on Tuesday, July Consumer Confidence should be slightly down, while Friday's Michigan Consumer Sentiment will come in flat. The less than upbeat consumer mindset is no doubt caused by the slowing recovery, expected to be confirmed by Friday's Advanced Q2 GDP reading.
>> 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 July 25 – July 29
>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months...With the economic recovery in slow motion, economists expect the Funds Rate to stay at its super low level a bit longer. 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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