Monday, January 9, 2012

Robust Job Market to Save Home Sales


The Beat Goes On.....


        New encouraging job numbers....private payroll growing!!!
Right in line with recent news on consumer spending(and use of credit cards) during the 2011 Christmas Season.


You will note in the third paragraph, Jim shares how many fewer markets are reporting tough unemployment numbers.  No we aren't over the hill yet on unemployment.  Yet, good results on begets good results.   


If you haven't noticed, the News Media has reported numerous positive signs to the Economy.  When you have the Media looking for the positive, more begins to abound.  Doubt the impact of the Media....check in with any Republican candidate that saw Media turn on them and dash his/her hopes in 2012.


No doubt there are hurdles all the way from housing challenges to international affairs(Iran) to international finance(Greece). 


Yet lets celebrate!!!!  We have lots to be thankful for in 2012!!!





Keeping you updated on the market! For the week of 
January 9 , 2012

MARKET RECAP
We've said that strong job growth will be key to a successful 2012. Early signs are encouraging. Automatic Data Processing (ADP) reports that private payroll numbers surged 325,000 in December – more than double expectations for a 160,000 increase.
The news on jobs is definitely good, but it's important to keep expectations tempered. This time last year, ADP reported that private employment jobs increased by 297,000. That bullish number got more than a few economists and pundits thumping for a full-bore recovery. Unfortunately, job growth abated and practically stagnated through the summer months of 2011.
That said, we remain encouraged. The Bureau of Labor Statistics (BLS) reports that unemployment is, for the most part, dropping across the nation. The BLS's data show that 58 metropolitan areas reported jobless rates above 10 percent, but that's down from 112 a year earlier. Another 129 areas reported jobless rates below 7 percent, nearly double the 65 areas reported in November 2010.
So it appears employment is on the rise, which bodes well for improved home sales in 2012. Prices are another reason we should see more sales. Standard & Poor's data show current home prices when adjusted for inflation are at 2001 levels. In other words, homes are very affordable. When homes are very affordable, more homes will be sold and more markets will clear.
We've provided many examples of markets clearing over the past few months. Beleaguered Las Vegas is the latest example. DataQuick reports that home sales increased 11.2 percent year-over-year in November, with sales being driven by below-$200,000 homes. Prices are low in Las Vegas , to be sure, but the days of free-fall depreciation appear to have ended, with the median home price holding at $115,000 for three consecutive months.
Mortgage rates contribute to the affordability quotient. On that front, mortgages remain very affordable. In fact, over the past week the 30-year fixed-rate loan again touched a new low. This should come as no surprise when you see that the 10-year U.S. Treasury note also touched a new low, with its yield dipping below 1.9 percent.
Rates remain low thanks to the ongoing debt crisis in Europe , which continues to draw money to U.S. Treasury securities even though these securities don't yield enough to compensate for inflation. That's good news for borrowers, especially borrowers on the longer end of the spectrum – such as those seeking 30- or 15-year fixed-rate loans.
Is it worth waiting for even lower rates? We didn't expect to see sub 4-percent loans in 2011, so anything is possible. But you have to consider what's probable. With job growth accelerating and consumer confidence rising, it appears the economy is growing sufficiently to suggest any further rate drops will be measured in a few basis points.
At this point, it's really all about risk and reward. Today, the reward is very high, but we think the risk will likely rise with more evidence of improving economic growth.

Economic
Indicator
Release
Date and Time
Consensus
Estimate
Analysis
Consumer Credit
(November)
Mon., Jan. 9,
3:00 pm , et
$7 Billion (Increase)
Important. Increased use of non-revolving credit reflects increased strength in sales of big-ticket items.
Wholesale Inventories
(November)
Tues., Jan. 10,
10:00 am, et
1%
(Increase)
Moderately Important. Increasing sales and inventory levels point to stronger economic growth.
Mortgage Applications
Wed., Jan. 11,
7:00 am, et
None
Important. Overall mortgage activity continues to trend higher.
Retail Sales
(December)
Thurs., Jan. 12,
8:30 am , et
0.2%
(Increase)
Important. Most components continue to advance, which reflects a pick up in economic growth.
Import Prices
(December)
Fri., Jan. 13,
8:30 am , et
0.5%
(Increase)
Important. The rise in import prices is indicative of rising consumer-price inflation.
Consumer Sentiment
(January)
Fri., Jan. 13,
9:55 am , et
71 Index
Important. Job growth continues to drive consumer sentiment higher.

The One Fly in the Ointment
Housing is still dealing with some difficult issues – namely shadow inventory and negative equity. The former has shown much improvement based on data released during the last quarter of 2011; the latter will be helped by HARP 2.0, which is expected to be fully engaged by March.
The good news is economic and job growth will continue to remove rot from the system; that is, if buyers and borrowers are sufficiently motivated to act. Unfortunately, we see too few buyers and borrowers sufficiently motivated. The one question we field most often these days is, “Are mortgage rates going lower?” Embedded in the question is the belief that rates are going lower, which keeps too many people on the sidelines.
Our wish list for this year includes a stronger economy, more jobs, and more confident consumers. We'd also like to see a ratcheting up of interest rates. That way, borrowers prone to procrastination will be less prone to procrastinate when they realize that any uptick in rates won't be followed by two downticks.
What's more, rising rates will be indicative of the sustained economic growth we all want.


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