Inside Lending, forcast and review

QUOTE OF THE WEEK…“In the middle of
difficulty lies opportunity.”–Albert Einstein

INFO THAT HITS US WHERE WE LIVE…Last week’s “difficulty”
for the housing market came from the news that New Home Sales dropped
0.7% for July, to a 298,000 annual rate. They’ve been in this low range
since May of last year, competing with existing homes selling at discounts. But
there is opportunity. The inventory of new homes dropped to its lowest level on
record. Equally encouraging, the new home median price is up 4.7% over a
year ago and the average price is up 8.0%.

Some analysts feel home sales this fall will be better than last, as supply
remains manageable and existing homes for sale are 20% below peak levels. We
already see the FHFA index, measuring prices for homes financed by conforming mortgages, UP 0.9% for June, its third monthly rise in a row and the biggest monthly gain since 2005. But the index is still 4.3% under where it
was a year ago.

Review of Last Week
RALLY CAPS BACK ON…Investors, focused on some
positive economic indicators, sent stock prices up for the week for the first
time in over a month. There was some negative regional manufacturing data, but
these surveys sometimes reflect sentiment more than business activity.
Chain-store sales also slowed a little, typical for August, but they’re still
comfortably above last year’s levels. Friday, real GDP growth was revised
down to 1.0% for Q2, but business investment was revised up and inventories own, both good signs for better growth the last six months of the year.

Dsputably positive news came with July Durable Goods orders UP 4%, a
level of business investment that makes it hard to argue for a double dip
recession. Shipments of core capital goods (no aircraft or defense items)
are UP 9.5% for the year. Friday the focus was on Fed Chairman Ben
Bernanke’s speech in Jackson Hole, Wyoming. He repeated his view that the
recovery is slower than he had hoped for and he’s prepared to use whatever
tools are needed, but there would be no changes to monetary policy right now.
For the week, the Dow ended UP 4.3%, to 11285; the S&P 500 was UP 4.7%, to
1177; and the Nasdaq was UP 5.9%, to 2480.

This Week’s Forecast
PENDING OME SALES, INFLATION, FED MINUTES, AUGUST JOBS…You’d have to be a glutton for economic data to want more than
we’re getting this week. People of our persuasion will focus on June
Pending Home Sales, expected to be off a smidge. Personal Income
and Spending should be up a tad and inflation measured by Core
PCE Prices should also be up, but well within Fed guidelines.

FOMC Minutes from the Fed’s August 9 meeting might prove
interesting, as that’s when our central bank promised to keep the Funds Rate
super low for another two years, but there were some strong “nay”
votes. Hmmm. Of course we’ll all focus on Friday’s August Employment
Report, expected to show job growth, though no better than the mild levels
we’ve had–and no improvement in the unemployment rate.