Once again it appears that we as an economy are going anywhere fast. The economic data being reported has resumed the pattern of pointing us in opposite directions. We are seeing data pointing to growth in some areas and declines in others.
On the positive side we learned this week that first time jobless claims remained pretty much little changed from the vast improvement that we saw reported last week. Additionally, retail sales increase by 1.2% which was higher than expected. It does seem that consumers are becoming a little more willing to spend on items other than the bare essentials.
Inflation on the wholesale and retail level continues to be a non-factor in the economy. The Consumer Price Index and Producer Price Index both came in lower than expected showing that it is has been very difficult for manufacturers or retail outlets to raise prices. The recession has taught most consumers how to be frugal and any attempt to get us to spend more money through higher prices is being resisted pretty much across the board.
What has me more concerned about the future of the economy, especially housing, is the data and other reports that are being released.
Housing Starts dropped 11.7% from the prior month indicating that builders are once again concerned about the ability to move inventory. Additionally, last months Housing Starts were revised from what was initially reported as an increase of .3%, to an actual decline of 4.2% making this the second consecutive months of builders slowing construction.
The Mortgage Bankers Association reported that purchase applications dropped 5% last week and refinances drop a huge 16.5%. Mortgage rates spiked last week and borrowers reacted quickly to the increases by holding off on purchases and refinances.
I am not trying to scare anyone reading this newsletter, however the following issues can have a significant impact on the recovery.
Congress on Thursday did not pass the unemployment benefits extension. What this means is that unless something else gets done, 4 million people will lose their unemployment benefits on November 30th. (Obama will like this from a reporting standpoint because when the 4 million people fall off the unemployment rolls, it will make the unemployment rate drop. Remember, people that are unemployed and do not receive benefits are not counted into the unemployment rate)
Maybe you saw this headline that said "Fewer Homeowners Behind on Their Mortgages". You have to love the headline but when you find out why fewer homeowners are delinquent, it may scare the daylights out of you. Fewer homeowners are delinquent on their mortgages because many more people have had their homes taken away from them by the banks. If you lose your home in foreclosure, you are no longer counted as delinquent. (You may get moved to the category of homeless, but at least you are not late on your mortgage right?)
Lastly, the number of foreclosures being filed on prime borrowers set a new record. What used to be a main problem with subprime borrowers, has now moved over to prime market.
When you combine 4 million unemployed people who will lose benefits in two weeks with an ever increasing number of people losing their homes to foreclosure, that has the makings for a housing disaster in the coming months.
Please understand that I am not assuming the doomsday scenario I described in the previous paragraph. There is a lot that can happen and I truly believe that through all of the challenges we have faced in the last few years, we as a country are more resilient. I just don't know how this will all play out, and the experts are not even talking about it.
Next week, although it is a holiday shortened week, there is a boatload of economic data coming out and quite a bit of it is related to housing. Let us hope that at least these reports are better than the housing data received this week.
Significant market reports due out for next week are:
• Tuesday November 23rd - GDP & Existing Home Sales
• Wednesday November 24th - First Time Jobless Claims, Consumer Sentiment, New Home Sales, MBA Applications, and FHFA House Price Index
Subscribe to:
Post Comments (Atom)
0 comments:
Post a Comment