New home sales have been a bright spot in the monthly housing reports!!

New home sales have been a bright spot in the monthly housing reports!!

It seems that the only two main news drivers of the market these days are housing and the fiscal cliff debate.  The housing news has been getting better and better.  Negotiations on the budget are inching forward as well and hope seems to be increasing that a budget deal will be reached in Congress.

Mortgage rates have risen off of their lows and the reaction in mortgage applications reflects this.  Home purchase applications rose 3% in the prior week however refinances, which are much more interest rate sensitive, declined by 2%.  Refinancing activity remains very strong and this slight decline is not significant.  The continued improvement in purchase applications is always welcome.

Earlier in the week the Case-Shiller Home Value Index continued the positive pricing trend with a report that home prices nationally increased .4%.  Although this increase is not earth shattering, for a one month measurement the increase is very respectable.  In addition home prices according to the report are 3% higher than the same time last year.

The Federal Housing Finance Agency which does its own home valuations analysis reported that home prices increased .2% from the prior month and 4.4% from the same time last year.  Whether you look at Case-Shiller or the FHFA report they both have 2 major aspects in common,housing is improving month by month and year by year.

New home sales which had been a bright spot in the monthly housing reports turned slightly negative.  The new home sales report came in 19,000 lower than expected on an annualized basis which is the first signs of new home sale weakness we have seen in quite some time.  In addition, September’s numbers were also lowered which is beginning to create a little bit of concern in the new home sector.  The one thing to realize is that earlier in the year new homes sales were stronger than expected and that may have something to do with the weakness we are seeing now. 

Lastly, let us not forget about the fiscal cliff debate that just won’t go away.  Many potential homebuyers have been interviewed and many of them have indicated that they are waiting to see what happens with the government budget before they make the decision to purchase a home.  Many homebuyers and employers are concerned about the future of’ the economy and employment and what will happen if the government fails to come to an agreement before the end of the year.  A.

I have faith that our elected officials will figure out a way to come to an agreement on the budget.  It may not be pretty but I would have to think that they all recognize that allowing the country to fall back into a recession is something that just cannot be allowed to occur.

JJ Mack
916-517-1800
jj.mack@apmortgage.com
www.apmcroseville.com

The housing market has entered "Full Recovery" mode!

The housing market has entered "Full Recovery" mode!

In this holiday shortened trading week, the release of economic data has been sparse in many areas with the exception of housing.  Real estate has taken center stage this week and my holiday report is here to bring you the highlights.

The most important thing to note is that the housing reports ALL are showing that the market continues to gain momentum in recovery.  Demand for housing is up, foreclosures are down, and prices are on the rise.

Monday started out with the release of the existing home sales report.  Sales of existing homes have been bouncing up and down and in October sales rose 2.1 percent up to an annualized rate of 4.79 million.  Although the prior month’s numbers showed a decline of 2.9%, the good news in the report is that the decline is attributed to lack of inventory.  It is the lack of homes for sales that is holding down the numbers, not homebuyer desire to purchase.  Housing supply is down from 5.6 months in September to 5.4 months for October which is the lowest rate in 6-1/2 years.

There are many buyers looking for homes and the biggest challenge is locating them.  I look in my own area and I can see that practically every house that comes on the market is sold within a matter of weeks.  I am excited in that I believe that as homeowners learn about housing demand and price stability,  little by little we will see a significant amount of sellers making the decision to no longer hold off on selling and place their homes on the market for sale.

The home builder's housing market report is the highest it has been in the last 6-1/2 years as well. Builders are very optimistic about the future of housing and they are moving forward with plans to build as their six month outlook for housing shows modest gains.  The fact that the number of distressed homes available for sale has declined continues to be one of the main driving factors of builder optimism.  The biggest challenge facing building at the present time is the continued tightness in the lending markets.

The final piece to the builder side of housing is that housing starts continue to grow at a strong pace.  New home building increased 3.6% in October which follows a giant 15.1 percent revised surge in September and a 3.0 percent gain in August.  The only slight negative in the report is that housing permits declined 2.7%.  Most experts don’t appear concerned by this drop for the fact that permits surged 11.1% in September.  With the exception of October, housing permits have been trending sharply higher over a good portion of the year.

JJ Mack
916-517-1800
jj.mack@apmortgage.com
www.apmcroseville.com

Housing market rates are STILL at all time lows!!!

Housing market rates are STILL at all time lows!!!

The irony of the markets is that we have a complete turn of events.  While the housing market continues to improve the stock market continues to head south.

Mortgage rates have once again hit record lows and the numbers are showing up all over how the housing market is responding.  Last week the Mortgage Bankers Association reported a jump in purchase mortgage applications of 11% and refinance applications of 13%.  These are by far the largest increases we have seen in a single week all year.

The Fed keeps pumping money into the bond market to keep interest rates low, however the uncertainty about the “fiscal cliff” has the stock market tanking because investors are purchasing government bonds in record numbers.  (I will talk more about the fiscal cliff” in a moment)

Next week there will be a lot more housing data to digest which will give a better picture of the real improvements taking place.  The reports on existing homes sales, housing starts and the housing market index will all be released on Monday and Tuesday.  Given that next week is a holiday week, it is expected that a lot of investors will be taking the week off so trading volume on this news will be light.

Ugh, now to talk about the rest of the economy.  The fiscal cliff is making headlines daily and more and more talk is focused that there is an ever increasing chance that the government will NOT act fast enough to avert the massive spending cuts that will be triggered on January 2^nd.

A few months ago most people were saying “there is no way Congress will let it happen.  The election will be over and they will get this thing handled”.  Well…the election IS over and Congress is behaving no different than they were before the election.  Time is running out and employers and consumers are becoming more and more concerned.

Employers are not hiring right now and first time jobless claims jumped last week by 78,000.  This jump blasts through the all important 400,000 mark and puts us at 439,000 claims for the week.  Although Hurricane Sandy is playing a role in the jump, the huge increase cannot be ignored and the reality is that the Hurricane represents only part of the increase.  Employers are very concerned about the fiscal cliff and have made it clear that they are not going to increase payrolls without knowing if we are going to be thrust back into recession because our elected officials cannot come to an agreement.

The stock market has been getting hammered in the last 30 days with the DOW dropping over 1000 points.  This drop is almost entirely due to investor concern about the fiscal cliff becoming a reality.

JJ Mack
916-517-1800
jj.mack@apmortgage.com
www.apmcroseville.com

Obama being re-elected caused stocks to DROP!!!

Obama being re-elected caused stocks to DROP!!! 

Thankfully the election is over.  I don’t know if I could have taken another day of the constant barrage of negativity and attacks being waged everywhere from TV, radio to print.  In the end, after the most expensive election in history we basically have a government that has changed very little.  President Obama has another 4 years, the House of Representatives remains controlled by Republicans, and the Senate is still controlled by Democrats.  Bottom line government is unchanged and it cost 6 billion dollars.  (Yes that is “B” for “billion”)

As discussed in last week’s newsletter, there was very little domestic news to trade on this week as everyone has waiting on the election results.  The election is done and the markets went crazy on Wednesday with investors pulling their money out of the stock market causing the DOW to experience its largest one day decline of the year of 313 points.  On Thursday the markets continued to tumble with another drop of 121 points.

Individuals not in tune with the markets believed that the drop was due to the fact that President Obama had been re-elected for another 4 years.  As much as investors and Wall Street were not thrilled with the election results, the sell-off in the markets was due to the fact that the landscape of government has not changed.  The fear that is taking over the markets is that if both sides of government don’t start working together quickly, the economy will very likely by thrust back into a recession at the start of 2013.

You may or may not know what it is, but the headlines all over the business wires are about this thing called the “Fiscal Cliff”.  In 2011 the Budget Control Act of 2011 was passed.  This law was created to permit the government to extend the debt ceiling which allowed the government to continue to borrow money to keep operating.  The law was passed and, simply put, stated that if the government is allowed to continue to borrow money, then Congress must agree to adopting certain spending controls and policies by the end of 2012.  In the event that Congress does not put these controls in place, then spending cuts and tax increases will be triggered on January 2^nd 2013.

Well... here we are almost at the end of 2012 and Congress is no closer to coming to an agreement on taxes and spending which means we are getting dangerously close to the Fiscal Cliff becoming reality.  Investors are scared and are starting to pull their money out of the stock market now.  If Congress does not get their act together then the spending cuts will be triggered and you can bet your last dollar that we will see the stock market tank like it did back in 2007.

Personally I believe that Congress WILL come to an agreement, however it may not happen until after the cuts begin to take place and pressure is put on them to take immediate action.

JJ Mack
916-517-1800
jj.mack@apmortgage.com
www.apmcroseville.com

There are still signs the housing market is improving!!

Before I get down to business I want to send my hopes and prayers to anyone and everyone dealing with the devastation in the Northeast, especially in New York and New Jersey.  No words can describe what is happening and I wish you a speedy recovery and rebuilding process.

The markets have been exceptionally quiet this week on account of the stock market being closed for 2 days from the flooding in New York City.  The market opened up on Wednesday and has been somewhat quiet as most investors were awaiting the national unemployment report being released Friday morning.  Well the report is out and…

National unemployment increased .1% to 7.9%.  Despite the slight increase, the underlying data bodes well in demonstrating that the jobs market is improving.  In October there was a net increase of 171,000 jobs and there was also an upward adjustment for September to 148,000.  Experts were anticipating an increase of only 125,000 so this report far exceeded expectations.  We still have a long way to go but things are improving.

The stock market in advance of opening Friday morning was indicating the potential for a nice rally to finish the week based on the jobs report however hopes of a market rally faded almost immediately after the opening bell.  Despite that the jobs numbers being better than expected, investor focus immediately turned towards the most recent statistics on economic growth which have been getting weaker month by month.

The employment numbers are going to be a huge political talking point for both sides before the election which is just a few days away.  I thought about explaining in this newsletter how each side will position the employment report, but I think you would be better served by watching it on TV.  Actually you will be best served by not watching it at all because it will probably make you confused and ill if you do.

There was more good news relating to housing this week.  The Case-Shiller Home Value Index showed an increase in home prices in the 20 major cities measured of .5% for August.  Additionally, the report showed that home prices are 2.0% higher from a year ago.  The positive housing news keeps coming.  It may be a slow rise but it certainly is a positive trend now.

Next week there is very little economic news on the calendar, however that will not matter as the market moving news will be the election.  Expect Tuesday and Wednesday to be very volatile days of trading.  Tuesday will be because investors will undoubtedly be trading on the reports of the election exit polls.  Wednesday the results will be in and depending on who is our next President, as well as what happens in the House of Representatives and the Senate, the market will be trading on that news as well.

JJ Mack