Pat Hill Realtor

Housing Market for Week of December 7, 2009

>> Market Update 

INFO THAT HITS US WHERE WE LIVE  Positive economic reports on housing continue, with October Pending Home Sales UP 3.7%. This was the ninth month in a row Pending Home Sales rose and the index is now 31.8% over October last year. Since this tracks the level of contracts on existing homes, Existing Homes Sales should continue their impressive rise for the next couple of months. 

The National Association of Realtors also predicted sales of previously owned homes would go UP 4.8% this year, reversing the downward sales trend of the previous two years. For 2010, the NAR projects existing home sales UP 10.8%, with a 3.6% hike in the median price. For new homes, the median price is expected to rise 3.9%. Of course, smart homebuyers will act now to avoid these anticipated price increases AND take advantage of the newly extended and expanded tax credits. High net worth individuals are already showing up--in a recent survey, 35% said they planned to increase their investments in real estate. 45% of them contend there are significant opportunities in residential markets, with many bargains to be had.

Anyone need further incentive? Freddie Mac reported mortgage rates down for the fifth straight week, now at record lows! The 30-year fixed-rate mortgage averaged 4.71%, with an average 0.7 point, for prime borrowers with 20% down payments. That's a new low for the survey which has been tracking rates since 1971.

>> Review of Last Week

GOOD-BYE, DUBAI--HELLO, JOBS!... What a difference a week makes. Friday after Thanksgiving, investors were fretting over Dubai's inability to pay back its debt. Those fears subsided early last week, then Friday, euphoria broke out among investors over an unexpectedly good jobs report. This included the first drop in the unemployment rate in a long time and job losses at their lowest level in nearly two years. The markets responded with all three indexes registering gains.

The week began with continued good news in manufacturing, the Chicago PMI UP almost 2 points. Tuesday, the ISM Manufacturing index was down slightly from its big October gain, but still well over 50, signaling industrial expansion for the fourth month in a row. Then we had strong Pending Home Sales covered above. Friday's encouraging employment report was set up nicely on Wednesday when Chicago-based job placement firm Challenger, Gray & Christmas said November job cuts were down 72.3% from last year. New unemployment claims were at their lowest level since September 2008 and the four-week average of Continuing Claims hit its lowest level in eight months.

Friday's jobs report showed a dramatic improvement in the employment situation for November. Payrolls declined only 11,000 for the month, but they were in fact UP by 148,000 after revisions to September and October added 159,000 jobs. Most surprising, the Unemployment Rate went DOWN to 10.0%, a turn-around not forecast until Q1 next year. Economists do not expect a decline every month, but many feel the unemployment rate will be significantly lower by late next year. And get this--total hours worked in the private sector was up 0.6%. But if the hours per worker had stayed the same, the increase in labor demand could have boosted payrolls by 650,000! Interesting.

For the week, the Dow went UP 0.8%, to 10388.90; the S&P 500 was UP 1.3%, to 1105.98; while the Nasdaq shot UP 2.6%, to 2194.35.

The bond market got clobbered thanks to the way-better-than-expected jobs data, which strongly pulled investors back into stocks. The FNMA 30-year 4.5% bond we watch dropped almost 100bp for the week, finishing at $101.53. Mortgage rates, as reported above, went to record low levels, but may not stay there for long if mortgage bond prices continue to slide.

>> This Week’s Forecast

RETAIL RULES... The king of the economic reports coming out this week will be Friday's Retail Sales figures for November. These should give us an indication of how well the consumer will be contributing to the economic recovery during the holiday buying season. We also get a preliminary read on the Michigan Consumer Sentiment Index and the weekly updates on Unemployment numbers. Fed Chairman Bernanke will be speaking early in the week and it will be interesting to see whether he thinks the improving jobs situation may result in a rate hike sooner than most experts expect.

Published Monday, December 07, 2009 8:46 AM by Pat Hill