Inside Lending

QUOTE OF THE WEEK..."Believing in progress
does not mean believing that any progress has yet been made."--Franz Kafka

INFO THAT HITS US WHERE WE LIVE...Major progress has yet to be made in
the housing recovery, but we can keep believing in it, since the data
isn't all negative. For example, Pending Homes Sales (contracts on
existing homes) were down 1.3% in July, but were UP 2.4% in June, so Existing
Home Sales should be up for August. In addition, July's reading was UP
14.4% over last year. The National Association of Realtors chief
economist said, "rising rents, record high affordability conditions and
investors buying real estate as a future inflation hedge" bode well for
real estate.
The latest Case-Shiller National Home Price Index reported home prices UP
3.6% in the second quarter compared to the first, though still down
5.9% from a year ago. This puts home prices at the level they were in early
2003. The 20-city composite index was UP 1.1% for June, but down 4.5% versus
last year. Best of all, none of the 20 cities posted monthly declines in
June and 19 out of 20 showed increases. Also, data aggregator and analytics
firm CoreLogic reported home prices up in July for the fourth month in a
row.

Review of Last Week

NO JOBS...No new jobs were
added to payrolls in August, according to the national Employment Report
released Friday. That was all investors needed to hear to start a stock selling
spree, as the Dow lost 253 points for the day and ended down a fraction for the
week. Jobs are important to the health of the housing market, but real
estate is local. So earlier in the week it was encouraging to see
the Bureau of Labor Statistics report thatunemployment
rates in July fell, compared to a year ago, in 69% of the 372 metro areas
they track.

A mix of good and bad news continued. The Consumer Confidence Index for August
hit its lowest level since April 2009. But the August ISM Manufacturing
Index came in better than expected, a tick above 50, still indicating
expansion. Final Q2 Productivity was down a trifle, but Personal Income
was up for July. And Core PCE inflation (excluding food and energy)
was well within the Fed's target range, up only 1.6% since last year.

For the week, the Dow ended down 0.4%, at 11240; the S&P 500 was down 0.2%,
to 1174; and the Nasdaq was flat, at 2480.

This Week’s Forecast

HAPPY LABOR DAY!...All the best to you this
Labor Day, as we honor the contribution that working men and women make to our
country.

The financial markets are closed today and the rest of the week is light on
economic news. ISM Services should stay above 50, showing modest
expansion in this sector of the economy, which accounts for about 85% of our
jobs. Initial Unemployment Claims are expected to hold just above
400,000, not where they should be, but well below their worst levels. The
July Trade Balance is forecast to shrink a bit with more export activity
from U.S. firms.