June 24th, 2009 – Elephant in the Room
This week brings a fresh round of key economic reports – including indicators from the housing sector. Beleaguered though it has been, it seems as though more than a few analysts were expecting a shimmer of improvement on housing data. Existing home sales were up in May – adding 2.4 percent over April’s numbers; however, the gain was still disappointing since it missed projections. Foreclosures at bargain prices and higher mortgage rates may be playing a significant role in the competition for buyers. Prices for homes have also declined with the median price coming in 16.8 percent lower than last year. New home sales did not appear to come in any better.
Coming in as a seasonally adjusted 342,000, May’s new home sales were 0.6 percent lower than the revised number for April. This was below expectations for 360,000. Although some analysts may have come to expect lower numbers from the housing sector, it would appear as though disappointment cannot be completely dispelled. Mortgage applications are just now beginning the long climb back from a seven-month low. This may be seen by some as a forward indicator that things will improve; however, applications and permits may not always be seen through to completion. Despite recent investor and analyst hopes that the recovery is well underway, there are still a few lingering questions regarding the overall economic condition of the nation. The full brunt of layoffs and foreclosures may have yet to be felt. This is something that the Federal Reserve may also be watching.
At the conclusion of their two-day meeting, the Fed maintained their familiar stance of holding off on any changes to interest rate policy. This comes just as the committee is being criticized (in some corners) for an aggressive approach to relief – which may be a catalyst for later inflation. These concerns have spawned speculative talk of a possible interest rate increase in the near future, but no commitments have been made today. Instead, the Fed seems poised to maintain its efforts to encourage lending and consumer spending. These efforts will hinge on the one critical thing that seems to have been lost in the mire of stimulus and bailouts – the U.S. economy is comparatively weak at the moment, and jobs and manufacturing will likely be key to recovery. Without a strong base to build on, even the positive economic indicators may falter – and gains in retail sales or housing might prove ephemeral.
Past Performance is Not Indicative of Future Results.
Past Performance is Not Indicative of Future Results.
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