QUOTE OF THE WEEK…“The lure of the
distant and the difficult is deceptive. The great opportunity is where you
are.”–John Burroughs, American naturalist and essayist
INFO THAT HITS US WHERE WE LIVE…The great opportunity now is for home
buyers to get a mortgage at an historically low rate. Freddie Mac
reported national average mortgage rates set new record lows last week.
But according to most observers, buyers shouldn’t expect further rate
dips. Lenders are seeing plenty of loan volume, so they don’t have to lower
pricing to get more activity.
Opportunity was also one of the themes in Fannie Mae’s August National
Housing Survey, where 69% of Americans polled say now is a good time to buy
a home. And in spite of all the talk about more price declines, people
expect home prices to dip only 0.5% in the next year. This is why some
observers feel we’re at a price bottom now. A strong 46% of Americans expect
rents to go up in the next year, so that should motivate purchases as well.
Review of Last Week
CONTINENTAL DRIFT…In four days of stock
trading, the Dow drifted down for the sixth week out of the last seven,
all because of financial dramas on the European continent. Europe’s
Central Bank President failed to offer any plan to stimulate growth following
the downward revision to his GDP forecast for the region. Friday there was
talk that Greece might default on its debt over the weekend. On our shores,
news that weekly initial jobless claims are still above 400,000
didn’t help matters either.
This Week’s Forecast
Even a couple of surprisingly good U.S. economic
reports couldn’t overcome all these bad vibes. The August ISM
Services Index was UP, to a better-than-expected 53.3, showing expansion in
the non-manufacturing sector responsible for about 85% of our jobs. Following
this, it was reported that the July Trade Deficit shrank, thanks to a $6.2
billion INCREASE in exports, which are UP 15.1% in the last year, ahead of
imports, up 13.6%.
For the week, the Dow ended down 2.2%, at 10992; the S&P 500 was down 1.7%,
to 1154; and the Nasdaq was down 0.5%, at 2468.
Friday the bond market saw a huge flight to safety by investors motivated by
those rumors of a weekend Greek default. A government spokesman in Athens
said that wouldn’t be so, but Wall Streeters opted for sleeping undisturbed
until Monday. The FNMA 3.5% bond we track closed Friday at $102.03, up .81
for the week. Mortgage bond prices were up and, as mentioned above,
national average mortgage rates set new record lows.
DID YOU KNOW?
…The CPI inflation indicator measures the change in
the cost of a fixed basket of products and services like housing, food and
transportation. The Core CPI favored by the Fed excludes food and energy prices
because of their monthly volatility.
This Week’s Forecast
INFLATION, RETAIL, MANUFACTURING…Wholesale
inflation is expected to be well under control in Wednesday’s Producer
Price Index (PPI) and Core PPI readings for August. Thursday, the
critical Consumer Price Index (CPI) and Core CPI inflation
measures are also forecast well within the Fed’s target range. August
Retail Sales should still show consumers doing their part, although
sales growth is predicted to be less than July’s.
Manufacturing is expected to be down a tad in the August Industrial
Production and Capacity Utilization readings. And the Empire
Manufacturing Index for New York and the Philadelphia Fed Index
should still show contraction in those regions, although less than in the prior
month.
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