Weekend Blog - January 29, 2010

This week has been loaded with a ton of economic news that at first glance appears negative. However, when you drill down into the information, you will see that appearances are misleading and that there is a positive light to be shed on the news.
On the real estate front, there were 3 major reports that came out this week:
1. New home sales decline to 9 month low.
2. Existing home sales drop 16.7%.
3. Case-Shiller Home Value Index drops for first time in 7 months.
As I mentioned, on first look these reports seem dismal however the driving forces behind these numbers explain why these numbers are not to be a significant concern at this time.
The declining reports of existing and new home sales can be directly attributed to the original expiration of the housing credit that was schedule to end on November 30th. In addition, the winter months are historically slower for housing than other times of the year. When you combine both forces, the housing number declines should not be unexpected or considered unusual.
The housing value index showing a decline can also be attributed to the time of year as well as the fact that banks have increased the number of foreclosed properties that they are placing on the market which in turn will have a negative impact on values. Although housing values have dropped, they are still more than 15% higher than a year ago. This tells us that overall housing values have stabilized. The downward spiral of values has ended and now we are just experiencing normal month to month vacillations.
The Federal Open Market Committee (FOMC) announced on Wednesday that the economy is improving at a moderate pace. The government expects the improvement to continue gradually and that overall the health of the economy is improving. For the foreseeable future the government does not believe that inflation is a concern therefore no the fed had no immediate plans to raise interest rates. The government remains committed to assisting in every way possible in the economic recovery and will continue to evaluate the impact and effectiveness of many of the stimulus plans currently in effect.
This week it was reported that unemployment claims dropped. The reported drop was short of analyst expectations, which once again is raising a little bit concern as to just how much we are recovering as an economy. However, on the bright side, a recent survey showed that over 90% of employers plan to expand their payrolls in 2010. The planned payroll increases indicate that in some cases employees will receive pay increases, while in other situations employers will increase their staff size hopefully resulting in driving down the national unemployment rate.
Economic news week on tap for next week is::
• Tuesday February 2nd - Pending Home Sales
• Thursday February 4th - Jobless Claims
• Friday February 5th - Employment Situation

Have a good Weekend!

JJ Mack