As I have promised in the past, my goal is to balance economic optimism with the reality of what is happening in the markets. This is no easy task as the pace of the recovery continues to slow.
Because of the amount of news reported this week, I am providing it to you in bullet point format for easier reading and digestion.
• Mortgage rates rose earlier in the week, only to do a complete reversal in the second half and once again return to record lows. The Mortgage Bankers Association reported this week that despite amazingly low rates, mortgage applications for home purchases declined 3.1%. Even refinance applications dropped 2.9%.
• Retail Sales dropped .5% however inside the numbers it is showing that consumers are spending more money on personal items such as cell phones, HDtv's, clothing, etc...
• The Producer Price Index and the Consumer Price Index both are showing clear signs that inflation is not an issue or concern on the wholesale or retail level.
• Jobless Claim reporting seems to be a non factor in impacting the markets as many people have realized that these weekly reports are not indicative of what is really happening in the employment sector. Initial jobless claims dropped a significant 29,000 which was nice to see. Continued unemployment is where the numbers are not representative of reality as the number of people falling off the unemployment rolls is growing and they are no longer being counted in any of the statistics
• Corporate profits reported significant increases in many sectors. Although sales have not increased which means that profits increased due to cost cutting measures, the fact that company profits are growing is a very good sign and the necessary first step before companies resume hiring.
• The stock market is targeted to finish modestly higher for the week based upon the better than expected profit reports.
As far as analysts predicting the future of the economy, it is clear that the so called experts don't have a clue as to where we are headed. I actually find it entertaining to watch because recent history has shown us that over the last 24 months, the so called experts have not even been close in their predictions. (Weren't mortgage rates so supposed to 6% by now?)
The bottom line, don't try to predict the future and don't listen to anyone that says they know where the market and economy is headed. The key to survival and thriving is to adapt quickly to any changes in the market and economy and remain committed to persevering. Do not bet the farm on any forecast or prediction because odds are, it will be far from what actually happens
Buckle up, The Wall Street Reform Bill is about to be signed. Enter the new age of Socialism!
Economic reports due out next week are:
• Monday July 19th - Housing Market Index
• Tuesday July 20th - Housing Starts
• Wednesday July 21st - MBA Purchase Applications
• Thursday July 22nd - Existing Home Sales & Weekly Jobless Claims
Your Mortgage Professional,
JJ Mack
916-517-1800
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