We should all be grateful that this week is a holiday week. Because of the holidays, trading has been very light and the barrage of negative economic news hitting the wires this week has had little impact on the markets.
On a high note, the stock market is set to finish the year at the highest point we have seen in 2 years. Without question corporate profit are growing and this is a major driver of the stock market rise. Many companies have figured out how to do more with less which ultimately improves company's bottom line profits. (Investors love that - however the millions of unemployed hate it)
As much as I would love to finish 2010 with nothing but optimism and positive words, the economic data this week is not making that easy for me to do.
The housing data as well as housing projections released this week all point to another challenging year in real estate ahead of us. If you have been watching the news, you will see that housing is once again taking center stage.
Housing inventory is up 50% from the same time last year. Shadow inventory, which is made up of all the properties owned by banks but not yet released into the market for sale, is increasing rapidly due to rising foreclosures. Foreclosures are expected to set a new record in 2011.
Between shadow inventory, increasing foreclosures, rising mortgage rates, talk is resuming about how housing may be heading for what is being called a double dip. With this week's release of the Case-Shiller Home Value Index showing home prices unexpectedly dropping 1.3% in October, many are fearful that home prices may decline another 5% to 7% in 2011. Only time will tell if homebuyers believe this and remain on the sidelines. The one bright spot in housing is the rise of 3.5% in Pending Home Sales.
When you add high unemployment that is showing no signs of improvement, higher gas prices, and declining consumer sentiment, the stage is set for more challenges ahead of us. Oh yeah, don't forget about the east coast blizzard that is going to impact post Christmas sales. Despite everything I just wrote, I remain very optimistic and I want to tell you why.
MY WORDS OF WISDOM: No matter what happens this year, it will not be worse than anything we have experienced in the last 2 years. The challenges in the economy are not new so we are now better prepared to deal with them mentally. Time and time again we have shown our resilience in the way we always manage to adapt to what happens. The key to persevering is to avoid stacking up all the negative news. Take each piece of news separately and ask yourself, "How does this impact me?" You will find that most of the news does not impact you at all. Just make sure you don't let the media suck you into the world of negativity because that is what they want to do. Remember -for every challenge that exists, an equal or greater opportunity for you to succeed is always right next to it. You must remain committed to finding opportunities and acting on them.
Reports due out for the first week of 2011 are:
• Monday January 3rd - ISM Manufacturing Index & Construction Spending
• Tuesday January 4th - FOMC Minutes
• Wednesday January 5th - ADP Employment Report & MBA Mortgage Applications
• Thursday January 6th - First Time Jobless Claims
• Friday January 7th - Employment Situation
Your Mortgage Consultant,
JJ Mack
916-517-1800
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