As promised, this week had no shortage of economic reports, and I am happy to say, that for the most part, they are almost all pointing to better times ahead. Is this just a momentary holiday present for the country or is it for real? Who knows, 2011 will ultimately tell us the answer but I am hopeful it is a trend.
The holiday season started out with a bang with retail sales reporting a much stronger gain than anticipated. Retail sales rose .8% in November following an upwardly revised 1.7% for October. Consumers are spending more money and there definitely seems to be more optimism and excitement about shopping.
Inflation on the wholesale level is starting to increase however it is still very much a non-threat to significant inflation in the coming months. Wholesale prices increased .8% however the Consumer Price Index, which measures inflation on the retail level, only rose.1%. This disparity between wholesale and retail continues to demonstrate that consumers are not willing to pay higher prices for goods.
The Federal Open Market Committee, to no one's surprise, did not increase interest rates. Additionally they reiterated that it will be some time before any rates are raised since the economy still continues to be very sluggish. The FOMC went on to specify that retail sales, although showing signs of improvement, are still remaining very sluggish overall. Housing also continues to remain a drag on the economy in that foreclosures are still very high and that overall housing data is still showing sales are anemic.
Speaking of housing, the Mortgage Bankers Association reported that purchase applications for the prior week dropped 5% and refinance applications declined .7%. These drops do not even reflect the more recent increase in interest rates that took place this week which leads many to believe that the numbers will continue to decline in next week's report.
Housing Starts rose a better than expected 3.9%. Housing over all is still very weak however the trends as of late seems to be indicating that housing may be rebounding. It is important to realize that any improvement in housing can have a positive impact on the psychology of the potential buyers in the market. If buyers perceive that the market has hit bottom, they are more likely to act. Additional urgency to purchase may also be stimulated by the recent increases in interest rates. 6 weeks ago the 30 year fixed rate was hovering around 4%. As of yesterday the same loan program is a full point higher at 5%.
It was reported this week that foreclosures in the 3rd quarter of 2010 declined by 21%. Before we all jump for joy you must understand that the 3rd quarter is when the scandal of inappropriate foreclosure signings was discovered. During this period of time many of the nation's largest lenders placed a moratorium on foreclosures which is the cause of the massive 21% drop. Lenders are now back in full swing of the foreclosure process so undoubtedly we will see the foreclosure numbers jump at the next quarterly report.
First time jobless claims declined slightly continuing the recent trend for the last 4 weeks. Overall unemployment seems to be stabilizing however the private sector is still showing much resistance to hiring new employees.
It has been nice the last few weeks to be able to report more and more about positive signs in the economy. We certainly have a long way to go, however remember the old adage, "How do you climb a mountain...one step at a time".
Reports due out for the holiday week are:
• Wednesday December 22nd - MBA Mortgage Applications, GDP and Existing Home Sales
• Thursday December 23rd - First Time Jobless Claims, Consumer Sentiment and New Home Sales
Your Mortgage Consultant,
JJ Mack
916-517-1800
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