Third Quarter 2012 Revised GDP

Third Quarter GDP Revised Higher. From July to September, the economy grew faster than previously thought increasing from 2.7% in the second reading to 3.1% in the final GDP reading. This is the fastest growth since the fourth quarter of 2011 when the economy grew at a 4.1% rate. Gross Domestic Product is a measure of the total production and consumption of goods and services in the U.S. GDP components like consumer spending, business and residential investment, and price (inflation) indexes illuminate the economy's behavior.

Home Prices Up Again In Most Markets

 

 

Home prices in the September Case Shiller 20-city composite increased 3.0% from September 2011. From August to September, the 20-city composite was also up, posting a gain of 0.3%. The national composite was up 3.6% in the third quarter from 2011 and was up 2.2% from the second quarter of 2012. The S&P/Case-Shiller Home Price Indices are published on the last Tuesday of each month at 9:00 am ET. They are constructed to accurately track the price path of typical single-family homes located in each metropolitan area provided. Each index combines matched price pairs for thousands of individual houses from the available universe of arms-length sales data.

October Unemployment State By State

 

         
                               
For October, 37 states and the District of Columbia saw unemployment rate declines, 7 states had increases, while 6 had no change. Year-over-year, 42 states plus the District of Columbia recorded unemployment decreases. Because Housing and ...

Jobs are so closely related, it is important to watch for changing trends in the Unemployment level. The chart below displays current levels of Unemployment by state. This information will be updated monthly.

Huge Jump In Unemployment Claims

For the week ending Novemeber 10, Initial Jobless Claims jumped 78,000 to an 18-month high of 439,000. In the aftermath of Hurricane Sandy, the one-week increase in jobless claims was the largest since 2005, when Hurricane Katrina hit the Gulf Coast.

Initial jobless claims measure the number of people (non industry-specific) filing first-time claims for state unemployment insurance. This report provides a timely, but often misleading, indicator of the direction of the economy, with changes in claims potentially signaling changes in job growth. It is assumed the stronger the job market, the greater the spending power, the healthier the economy. Weekly claims are volatile and data can be skewed by holidays; therefore, many analysts track a four week moving average of data to get a better sense of the underlying trend in claims.

September JOLTS

 

The September Job Openings and Labor Turnover report (JOLTS) came in at 3561K, down from the upwardly revised number of 3661K for August. This was also below the expectations of 3653K and marks the lowest reading since April.

The data for the Job Openings and Labor Turnover Survey are collected and compiled monthly from a sample of business establishments by the Bureau of Labor Statistics (BLS). In a monthly survey of business establishments, data are collected for total employment, job openings, hires, quits, layoffs and discharges, and other separations. The JOLTS program covers all private nonfarm establishments such as factories, offices, and stores, as well as federal, state, and local government entities in the 50 states and the District of Columbia.

New Home Sales September

 

 

September new home sales jumped 5.7% to 389,000, up from the August level of 368,000. This marks the highest pace for new home sales since April 2010, during the first-time homebuyer tax credit. The new home supply dropped from 4.7 months i...

n August to 4.5 months for September.

The New Home Sales report shows the number of newly constructed homes with a committed sale during the month. It is compiled through nationwide survey of 10,000 builders/owners of 15,000 building projects and through sampling of permit-issuing offices, as well as land not covered by building permits. The data is timely and is used in conjunction with the existing home sales release from the National Association of Realtors. The level of new home sales indicates housing market trends, and economic momentum signaling consumer purchases of furniture and appliances. Simply, the volume of sales indicates housing demand.

September State By State Unemployment Rate

 

 

 

For September, 41 states plus the District of Columbia saw unemployment rate decreases. Year-over-year, 44 states plus the District of Columbia had decreases. Nevada reported the highest level of unemployment at 11.8%, with Rhode Island and California also in the top 3. Meanwhile, North Dakota posted the lowest rate at 3.0%.

Unemployment Sees Unexplained Big Drop?

Well, since it is election time, let's get your political juices flowing. How did the latest unemployment number drop SIGNIFICANTLY from 8.1% to 7.8%? So, there could be two answers to the question one of which is factual and one that has a flavor of conspiracy as stated by Jack Welsh, probably the greatest CEO in history. Welsh says that the numbers have been cooked by the administration prior to the election. If a minimum of 150K jobs must be created to keep pace with new people just entering the workforce how can a report indicating only 114K jobs created make the unemployment number go down? The factual answer is that the participation rate is the lowest it has been in 31 years and means more people have given up and stopped looking for work and then are no longer counted in the unemployment report. So, when you see that the unemployment rate dropped, keep in mind that it dropped for a VERY bad reason!

 

Former CEO Jack Welsh says white house manipulates jobs data.

Good News For Home Values

 

Home prices in the Case-Shiller 20-City Composite increased 1.6% from June to July. This is the third consecutive month that all 20 cities recorded increases. Year-over-year the 20-city composite index is up 1.2% and 16 of the 20 cities hav...

e seen yearly increases. See the chart to see how good your area is doing.

The S&P/Case-Shiller Home Price Indices are published on the last Tuesday of each month at 9:00 am ET. They are constructed to accurately track the price path of typical single-family homes located in each metropolitan area provided.

Unemployment State by State

 

Unemployment rates for August increased in 26 states, decreased in 12 states, and 12 states remained the same from July. Year-over-year 42 states and the District of Columbia posted unemployment rate decreases. From July, the national unemployment rate dropped to 8.1%, and was 1.0% lower than August 2011.

Because Housing and Jobs are so closely related, it is important to watch for changing trends in the Unemployment level.

Home Sales Volume And Prices Are Increasing

  

 

Great News! Existing home sales for August increased 7.8% to 4.82 million homes. This is up from 4.47 million homes in July. This represents the most homes sold since the homebuyer tax credit expired in 2010.

Existing Home Sales is a measu...

re of the selling rate of pre-owned single-family homes, collected by the National Association of Realtors from 650 realtor associations. The data is timely and is used in conjunction with the new home sales release from the Census Bureau. Sales of existing (or pre-owned) houses account for roughly 84% of all houses sold. Sales of new houses account for the other 16%. Simply, the volume of sales indicates housing demand.

 

Real Median Income

 

Real median income decreased 1.5% in 2011 to $50,054, down from $50,831 in 2010. The 2011 real median household income was 8.1 percent lower than in 2007, the year before the most recent recession, and was 8.9 percent lower than the median ...

household income peak that occurred in 1999.

Meanwhile, 46.2 million people were in poverty in 2011, a 15% poverty rate. Though down slightly from 15.1% in 2010, the poverty rate remains high.

Case-Shiller Up In 12 Of 20 Cities

 

Home prices in all 20 cities in the S&P/Case-Shiller home price index increased in the month of May. Combined, the index rose 2.2% from April. Year-over-year, 12 of the 20 cities have higher prices, though combined the index is down .7%. Le...

ading the way is Phoenix, up 11.5% from last year, while the largest decrease is in Atlanta where prices are down 14.5% from last May.

The Case-Shiller Indexes use the repeat sales method for index calculation, analyzing data on single-family properties that have two or more recorded sales transactions. Changes in housing types and sizes, or changes in the physical characteristics, of houses are specifically excluded from the calculations to avoid incorrectly affecting the index value. Home sales pairs are accumulated in rolling three-month periods to offset any delays in sales data recording and to keep sample sizes large enough to create accurate price change averages.

New Home Sales Up 15% Year Over Year

New Home Sales fall 8.4% in June to 350K units annualized down from the upward revision of 382K from 369K in May. The May revised mark was a two-year high for new home sales. Though down from May to June, new home sales are up 15.1% year-over-year.

The New Home Sales report shows the number of newly constructed homes with a committed sale during the month. It is compiled through a nationwide survey of 10,000 builders/owners of 15,000 building projects and through sampling of permit-issuing offices, as well as land not covered by building permits. The data is timely and is used in conjunction with the existing home sales release from the National Association of Realtors. The level of new home sales indicates housing market trends, and economic momentum signaling consumer purchases of furniture and appliances. Simply, the volume of sales indicates housing demand.

Housing Starts Show Good Increase For June

Housing starts for June increased nearly 7% to 760,000, up from 711,000 in May. This marks the higest level for housing starts since October 2008. The Housing Starts report measures the number of residential units on which construction is begun each month. A start in construction is defined as the beginning of excavation of the foundation for the building and is comprised primarily of residential housing. Since home builders don't start a house unless they are fairly confident it will sell upon its completion, if not before, changes in the rate of housing starts can tell us a lot about demand for homes and construction outlook. Furthermore, each time a new home is started, construction employment rises, revenues for the home builder and a myriad of other producers also increase; the economic "ripple effect" can be substantial.

Consumer Sentiment Following Other Indicators Down

Consumer sentiment hit the lowest level since December coming in at 72.0, down from the 73.2 reading in June. The consumer sentiment report measures the attitudes and expectations concerning both present and future economic conditions of 50...0 consumers. Just like Consumer Confidence, the level of consumer sentiment is directly related to the strength of consumer spending. It is almost identical, with two subindexes - expectations and current conditions, but has two monthly releases, a preliminary and final reading. The consumer expectations portion of the Michigan survey is a component of the leading economic indicators index. Consumer spending accounts for two-thirds of the economy, so the markets follow any indicator relating to consumer behavior and attitudes. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend.

Disappointing Jobs Numbers Keep Coming

According to the Labor Department, 80,000 U.S. jobs were created in June as employment data continues to falter. The jobs data for May was revised up from 69,000 to 77,000, though the report for April was revised down to 68,000. As shown in... this chart, jobs growth was strong in early 2012 but has been soft over the last several months. The Labor Department also reported that the unemployment rate remained unchanged from last month at 8.2%.

Bad Manufacturing Number

The Institute for Supply Management's manufacturing index (ISM Index) dropped below 50% for the first time since July 2009. The June reading of 49.7% is a sign of contraction in the manufacturing sector. Readings over 50% indicate expansion... in manufactoring. The ISM Index is a national manufacturing index based on a survey of purchasing executives at roughly 300 industrial companies. It gets reported the first business day of each month for data for prior month. It is extremely timely and nearly always moves markets. It is the king of all manufacturing indices and is considered the single best snapshot of the condition of the factory sector.

Another Poor Retail Sales Report

 

 

Retail Sales for May dropped .2%, marking the second consecutive month of declining sales. The April report had initially been reported as an increase, but was revised to also reflect a decline of .2%. The reports here in the US have not be...en good and points to more Fed action in the future. We will find out what is in the Fed's mind next week as they meet June 20th.

The retail sales report is a measure of the total receipts of retail stores from samples representing all sizes and kinds of business in retail trade throughout the nation. It is the most timely indicator of broad consumer spending patterns and is adjusted for normal seasonal variation, holidays, and trading-day differences.

Bernanke Hints On QE3

Initial Jobless Claims fall by 12K last week to 377K just above our prediction of 375K. Bernanke says the Fed is prepared to take action to protect the financial system, US economy, in event stresses escalate. Mr. Bernanke says the crisis in Europe poses significant risks to US financial system and the economy and must be monitored closely. Bernanke hints at QE3 but doesn't say it is imminent - Stocks cut some gains, Bonds moving higher. We have been predicting that the Fed will start looking at QE3 for some time. Dow and Bonds on the upside with Dow currently up 102 pts. and bonds up 28bps.

More Bad News May Cause Rates To Go Lower

Bonds have been trading in a clear, long-term Rising Wedge, after the steep decline in late 2010. In many cases - the Bond will continue to rise over time right into this apex - meaning that rates could end up lower in the weeks ahead - but potentially not without volatility.

Which way will Bonds break out of this Rising Wedge is the $64,000 question that will be answered in the weeks ahead. We could see a continuation higher out of this trend - which could mean even lower ...rates.

A lot will depend on Europe and Friday's Jobs Report - which will then influence what the Fed does at the next Fed Meeting on June 20th. Will there be more QE and if so, how will the Bond perceive it? If the Bond reacts negatively like it has on past official QE announcements - then the next couple of weeks leading into the June 20th Meeting will really present a wonderful opportunity to line up your clients to get a mortgage as Mortgage Bonds creep towards this apex. This is a technical and fundamental opportunity for rates that won't last forever and one thing we know for sure - when prices break to the downside out of a Rising Wedge - the price action to the downside is typically very fast - like people exiting a building when someone yells "fire".

Is the Consumer Confidence really showing confidence?

For the third consecutive month consumer confidence fell, dropping to 64.9 in May to the lowest level since the January reading of 61.5. When the economy is growing at a strong pace, consumer confidence readings usually reach levels of 90 or more.

The consumer confidence survey measures the level of confidence individual households have in the performance of the economy now and in the future. It is a leading indicator of future spending and the business cycle. 5000 consumers in the nine census divisions across the country are surveyed each month. The level of consumer confidence is directly correlated to the strength of consumer spending, which accounts for two-thirds of the economy.

Is The Euopean Union Crumbling?

It's all about the EuroZone. As we mentioned Greece is not accepting austerity measures and riots are getting larger. Markets have started to price in the exit of Greece from the Euro. Standard & Poor’s minutes ago downgraded 5 Spanish bank...s. Eleven Euro leaders have been ousted and if things continue on this path we should expect those economies to be picked off one by one. This should strengthen the dollar and create a flight to quality to our Bond market. As we mentioned, this could cause rates to drop possibly as low as 3.5% for 30 year fixed. Are you prepared? Call me to find out how to position yourself if this occurs.

New Home Sales For April

New home sales for April increased 3.3% to 343,000. This is up from the upwardly revised number of 332,000 in March. For the last 3 months, new home sales have averaged 344,000. This is up 14% over the same period last year.

The New Home Sales report shows the number of newly constructed homes with a committed sale during the month. It is compiled through nationwide survey of 10,000 builders/owners of 15,000 building projects and through sampling of permit-issuing offices, as well as land not covered by building permits. The data is timely and is used in conjunction with the existing home sales release from the National Association of Realtors. The level of new home sales indicates housing market trends, and economic momentum signaling consumer purchases of furniture and appliances. Simply, the volume of sales indicates housing demand.

Housing Starts Show Small improvement

Housing starts for April increased 2.5% to 717,000 annualized units. This is up from the March reading of 699,000.

The Housing Starts report measures the number of residential units on which construction is begun each month. A start in construction is defined as the beginning of excavation of the foundation for the building and is comprised primarily of residential housing. It is a seasonally adjusted annualized rate of houses (residential units) started in a given month, taken from a sample of 844 out of 17,000 permit sites.

The Beginning Of The End?

Are we starting to see the beginning of the end of the Eurpoean Union? I have written off Greece for some time now but with the election of the Socialist candidate in France, the 9th EU leader swap, we may be adding other countries to the list. The new leader wants more ECB lending, flood Euros into the economy (20 Billion), tax the wealthy and lower the retirement age - sound familiar? Accepting the bailout money but refusing the austerity measures, so when will Germany be forced to throw in the towel? A fresh round of uncertainty is sending the Euro lower and giving a boost to the US Dollar and Bonds.

Both Italy and Germany reported higher than expected unemployment rates, with the former showing the highest reading since 2000. That means more economic pain is likely to come and is Bond friendly. The ADP Report, which provides a read on private sector job health, showed an anemic 119,000 private sector job gains. All recent economic indicators point to a slowing economy and as we mentioned this could stir rumors of QE3. Bonds are testing all time highs and if they can break through resistance rates may hit all time lows, see chart and blue trendline.

Are We Headed For Lower Rates?

People have been asking where the market is trending. We are seeing a lot of economic bad news which tends to be Bond friendly. This morning GDP reported well below expectations at 2.2% and inflation rose at 2.4%. Slower growth and higher inflation is NOT GOOD for this fragile economy. The chart below shows the recent 'up escalator' trend line but the blue horizontal line is the ceiling of resistance. If Bonds break above this line rates could come down a bit but if prices pull back there is a lot of room to fall. Share this with anyone you know who is buying or refinancing a home.

March State-By-State Unemployment

Featured Chart for Monday, April 23rd
March State-by-State Unemployment

Regional and state unemployment rates were little changed in March. Thirty states recorded unemployment rate decreases, 8 states posted rate increases, and 12 states and the District of Columbia had no change.

March Housing Starts

The Commerce Department reported yesterday that Housing Starts fell 5.8% in March to 654,000 on an annualized basis as the troubled housing markets continue to hover near the bottom. On a positive note, Housing Starts are up 10.3% above the March 2011 rate of 593,000 as evidenced by the chart below. Housing Starts are the number of residential building construction projects in a monthly period released by the Commerce Department in conjunction with the U.S. Census Bureau.

March CPI rises to 0.3%, Core CPI at 0.2%, both inline with estimates. Although these numbers were inline with expectations the Inflation numbers are now at the upper end of the range that the Fed uses to measure inflation.

The Consumer Price Index (CPI) is a measure of the average price level paid by urban consumers (80% of population) for a fixed basket of goods and services. It reports price changes in over 200 categories. The CPI also includes various user fees and taxes directly associated with the prices of specific goods and services.

Initial Jobless Claims Week Ending April 7th

Initial jobless claims increased 13,000 to 380,000 for the week ending April 7. This marks the highest level since January, and the second highest reading for 2012. Jobless Claims from the previous week were also revised up to 367,000, up from 357,000. The 4-week average for jobless claims increased 4,250 to 368,500. The 4-week average is considered a more accurate gauge on labor trends because it smoothes out weekly volatility.

The unemployment rate declined to 8.2%. While that is good news on the one hand the figure does need to be taken with a grain of salt - especially in light of the significant headline jobs creation miss. The reason why: the Labor Force Part...icipation Rate (LFPR), which removes some of the guesstimating and adjustments of the unemployment rate. That number (currently at a 30-year low) is a concern because if the LFPR continues to decline, it means we are seeing a smaller ratio of people working against the overall population. This will be another headwind to our already debt-laden government.

Bonds open higher after yesterday's steep sell-off as investors look for some bargains feeling the plunge was a bit worse than it should have been currently up 35bps. ADP Private Employment in March increased by 209K, just below the estimate of 217K. Stock futures weak after the Fed doesn't signal QE3 coupled with a weak Spanish bond auction, Dow currently down 147 points. The European Central Bank sees downside risks to its economy - inflation risks weaker than expected, which is Bond friendly news. The ISM Service Index falls to 56.0 March from the previous reading of 57.3 and below the 56.7 expected. Cautiously rate floating bias.

The Pain Of No Gain Stays Mainly In Spain

Spain's Prime Minister Mariano Rajoy is slated to roll out more austerity measures designed to help the country meet its budget deficit goals as part of the rules recently agreed to in the european union. Unfortunately, Spains GDP is already contracting, and the country is grappling with a 23% unemployment rate so it is very difficult for the country to grow and pay down debt with even more austerity. So what are the citizens doing while looking at the economic hole and more tightening measures? And the answer is, you guessed it, evidently you hit the streets and riot. They don't want to adopt tough measures to help the country regain solvency. The Spain story sounds a lot like Greece not to long ago.

Market Update

Today’s 5-year auction was a clunker - so looking ahead, this does not bode well for tomorrow's longer-term 7-year note auction. The Bond remains just above the 100-Day Moving Average but volatility reigns supreme. The Bond did gain 141bp in 6 trading days. MBS fell on the above technical bearish signals after the recent rally. The 3.5% coupon fell to 102.62 down 25bp. The Dow fell 71.52 points to 13,126.21. The Treasury will sell $29B 7-yr notes tomorrow. Initial Jobless Claims and GDP will be reported and Claims should be around 350K and GDP at 3.0%.

Made your payments on time but you are left out of special programs?

Fannie and Freddie may consider principal write downs.

Homestead Mortgage, L.C.
Bonds are struggling to get off the down escalator trend and break above the 100 day moving average (see chart). New Home Sales fall 1.6% in February to 313K units annually, below the 323K expected. Within the New Home Sales data it was reported that median prices rose 8.8% to $233,7000, the largest 1-month rise in 14 months. The national average price for a regular gallon of gasoline is at $3.88 up from $3.57 a month ago. Lots of market moving indicators next week.

 

Market Update March 22, 2012

Initial Jobless Claims fall 5K to 348K in the latest week and are the fewest since February of 2008. Bonds losing some of their luster after the data. The yield on the 10-Year T Note falls to 2.26% after hitting 2.39% earlier in the week. Freddie Mac reports that home loan rates rose to 4.08% in the latest week - to obtain that rate you would have to add on a 0.8 point. Fed's Bullard sees "inflationary risks" this year, was he reading our post yesterday? It's good to see that some Fed Govenors have woken up as I have been talking about inflationary signs for months.