Monday Market Update!

Keeping You Updated On The Market

For The Week Of

March 28, 2011

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Market Recap

Bearish pundits – those chatterers who seek notoriety by accentuating the negative – had reason to strut this past week because the news on housing was, for the most part, to their liking.
Existing sales for February fell 10 percent to an annual rate of 4.88 million units. Supply could be a concern going forward. The inventory of existing homes for sale rose 3.5 percent to 3.48 million units, 8.6 months of supply at the current sales rate and a 14.6 percent increase over January's 7.5 months.
Supply issues raise pricing issues. On that front, the median sales price of existing homes fell 1.1 percent in February to $156,100, while the average price dropped 1.4 percent to $203,000. Year-over-year, the decline for the median price is deepening, at minus 5.2 percent, but holding steady at minus 2.7 percent for the average price.
New home sales tumbled 16.9 percent in February to an annual rate of 250,000 units, which was a mild shock, considering the consensus estimate was expecting 295,000 units. Fewer sales mean more inventory. Supply rose to 8.9 months at the current sales rate. As for prices, the median price fell 13.9 percent to $202,100, a drop that sweeps the year-over-year rate into the negative column at minus 8.9 percent.
Following the off-putting news on home sales, it was only natural that a few analysts were willing to fan the pessimistic flames. MacroMarkets lead the charge, stating that a double-dip in housing could arrive this year. "Overall, the sentiment among our expert panel regarding the U.S. housing market outlook continues to deteriorate," said Robert Shiller, co-founder of MacroMarkets. "Now they are expecting only a weak recovery, and even that is not until 2013."
Now is as good a time as any to take a cynical shot at “expert” panels. Let's not forget that the experts were wildly off the mark on new and existing home sales for February. Why did so few ignore the obvious – the weather? Sales were actually flat in the West and the South. Sales in the Northeast declined 57 percent and 27 percent in the Midwest – two regions hit particularly hard by cold and snow.
February's data were a downer, but we expect to see improvement in March based on the developing upward trend in purchase applications. Lower mortgage rates, which have eased by 25 basis points over the past four weeks, have stimulated interest. And let's not overlook an improving economy. Fewer Americans are claiming unemployment benefits. Since July, the four-week moving average has dropped from 500,000 to 380,000. This trend will boost expectations for accelerating payroll and economic growth. That's good news for housing's outlook.
 

Economic Indicator	Release Date and Time	Consensus Estimate	Analysis
Personal Income & Outlays (February)	Mon., March 28, 8:30 am, et	Income: 0.5% (Increase) Outlays: 0.5% (Increase)	Moderately Important. Real income is growing, while spending is more reflective of price inflation.
Pending Home Sales Index (February)	Mon., March 28, 10:00 am, et	2.0% (Decrease)	Important. Inclement weather is expected to weigh on the index.
Case-Shiller Home Price Index (January)	Tues., March 29, 9:00 am, et	0.4% (Decrease)	Moderately Important. A decrease in national prices is likely based on pricing data from other sources.
Consumer Confidence (March)	Tues., March 29, 10:00 am, et	64.5 Index	Moderately Important. Confidence is expected to ease, but remains in a positive trend.
Mortgage Applications	Wed., March 30, 7:00 am, et	None	Important. Month-to-month strength hints at more home buying heading into spring.
Employment Situation (March)	Fri., April 1, 8:30 am, et	Unemployment Rate: 8.9% Job Growth: 200,000	Very Important. The trend in unemployment claims suggest strong job growth for February.
Construction Spending (February)	Fri., April 1, 10:00 am, et	0.9% (Increase)	Important. Nonresidential and public outlays are offsetting weakness in residential outlays.

Mortgage Rates or Home Prices?

It can be an incapacitating conundrum: weighing interest-rate movement rates against home-price movements. The trade-off can be difficult to analyze, especially for borrowers who mistakenly believe rates have always been low and will always remain so. Of course, many neophyte homebuyers are thinking along a similar line; that is, home prices are low and will stay low.
The analysis is actually straightforward, if placed in a historical context. Both mortgage rates and home prices are much closer to being at, or near, a bottom than a top when comparing today's market to markets past. Of course, it is entirely possible that a buyer could sign a contract, lock in the loan rate, then go home and read that national home prices and mortgage rates have dropped.
Market tops and bottoms are impossible to predict. The best we can do is to estimate where we are based on long-term trends and similar past economic circumstances. From this perspective, there is really no trade off. Both home prices and mortgage rates are low, so there is no conundrum and there is no reason to put off buying a home for anyone staying put for at least five years.