Demand for houses are increasing!!

So many areas of the economy are deteriorating with the exception of housing.  With mortgage rates once again dropping to record lows, buyers are taking notice and hitting the streets.  We are receiving reports of stabilizing home prices as well as realtors across the country are continuing to report increased buyer activity.  In some areas of the country, especially the south, we are even seeing bidding wars on properties.

The National Home Builders Association that releases the monthly Housing Market Index reported that builders have seen a significant increase in demand for new construction in the month of April.  Housing Starts also increased 2.6% in April after having been down by the same amount in March.

There is a lot of concern about Europe again, especially Greece, and that has been weighing heavily on the minds of investors.  If you look at a graph of the stock market for the month of May, it looks like a car rolling down hill without any breaks.  The DOW Jones Industrial Average has dropped 837 points since the 1^st of the month.  Investors are running from the markets and placing their money in the safe haven of government securities.  It is this panic that has the mortgage rates reaching all time lows.

Inflation continues to remain a non factor as consumers have maintained their frugal ways and refuse to pay higher prices.  Many industries have attempted to increase prices on a wholesale or retail level, and as soon as they do, they immediately see a drop in sales.  Consumers simply refuse to pay higher prices.  I am a consumer and I know that since the recession, I have completely changed my spending habits to be more conservative and I see no reason to change this regardless of how the economy improves.

Retail Sales improved however at a much slower pace than before.  In March, sales increased .7% whereas the month of April only realized a slight increase of .1%.  None the less, and increase is an increase.

First Time Jobless Claims remained virtually unchanged for another week.  Some believe this is a sign of employment stability however others seem to believe that there is cause for concern.  Typically at this time of year there is an increase in hiring and that has simply not materialized.  Claims remain constant at a slightly elevated level of 370,000.

With the economy slowing, combined with the concerns from the Greek financial crisis, the Federal Open Market Committee is beginning to warm up to the idea that they may have to launch a 3^rd round of economic stimulus, known as QE3.

By no means is the Fed even in the planning stage of providing more stimulus, they are simply at a point where more members are stating that if necessary they will consider it.  You may remember that just a few months ago, many of the members were staunchly against providing any more help to the economy.  It appears that the deterioration in the markets is beginning to move some of the members to realize that the economy may be in fact slowing down far more than first thought.

JJ Mack