The stock market seems to be continuing its slow but steady climb as confidence in the markets continues to grow. IRA's, 401K's, Mutual Funds, and shareholders are all seeing an increase in their account balances which is certainly a catalyst for improving consumer confidence.
As promised, housing data was the main focus this week. Starting from the beginning of the week all the way through to yesterday, we received reports on The Housing Market Index, Housing Starts, Mortgage Applications, Existing Home Sales. The Housing Market Index, which measures home builder opinion's on the current and future state of new construction, showed that construction overall is showing no current improvement. Additionally, the majority of builders believe that demand for new construction will not improve any time soon.
Housing Starts declined in December which comes as little surprise to anyone involved in real estate. The question that is being pondered is: is the decline due to the weather, or just overall softness in the housing market? Many experts have stated that this time of year it is very difficult to gauge housing and that not much weight should be placed on new construction reports at this time.
Building Permits showed a sharp increase last month which was an unexpected surprise. Anyone reading this article might say, that does not make sense, if builders don't feel the market is getting better and new construction is not doing well, why would building permits increase? The answer is that although builders may not be breaking ground, they still need to prepare for an upswing in the market by having their plans and permits in place.
The Mortgage Bankers Association reported that applications for home purchases declined another 1.9% last week following the prior week's 3.7% drop. On the flip side, refinance applications increased 7.7% as mortgage rates have dropped slightly.
The biggest housing report of the week is Existing Home Sales which jumped an unexpected 12.3%. (Now here is where I need to clarify this report as the experts have got it wrong.) Please understand that I am very happy about the increase in home sales and I don't want to throw cold water on the parade.
Existing Home Sales measures closed transactions according the National Association of Realtors. Experts are attributing the increase in home sales to the fact that interest rates increased and that motivated many more buyers to jump into the market. "Not true says I":
Existing Home Sales have increased because the process of closing home loans is taking longer. In the late fall there was an increase in Pending Home Sales. We are now seeing them exit the system in bulk due to the delays that were caused by the initial increase in purchase transactions. (Please excuse what I am about to write) Simply put, the housing system has been "constipated". Sooner or later what gets shoved in, will come out) Think about what happens the days following Thanksgiving. (I truly apologize to anyone I may have offended)
Reports due out next week are:
• Tuesday January 25th - S&P Case-Shiller Home Price Index
• Wednesday January 26th - MBA Mortgage Applications, New Home Sales & FOMC Announcement
• Thursday January 27th - First Time Jobless Claims, Durable Goods Orders and Pending Home Sales
• Friday January 28th - GDP and Consumer Sentiment
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