Market Update for Week of February 7, 2011

Last Thursday the National Association of Realtors (NAR) came through with the encouraging report that sales of existing single-family homes and condominiums in Q4 of 2010 increased over Q3 in 49 out of 50 states -- a 15.4% rise for the three-month period. However, sales were down 4.78% for the year, to an estimated 4.91 million, from their 5.16 million level the year before. Fueled by the homebuyer tax credit, that higher 2009 sales rate was deemed "unsustainable" in 2010 by the NAR. These are the national numbers. Here in the Western Upstate MLS, our volume was up +2.4% in homes sold, and +.9% in prices vs the previous year.

Home prices, on the other hand, appear to be stabilizing. The NAR revealed that the national median existing single-family home price in Q4 of 2010 stayed essentially flat versus Q4 a year ago, coming in at $170,600. Here's a good sign that prices are beginning to climb off the bottom: median prices in Q4 of 2010 rose in 78 of 152 metro areas compared to Q4 a year ago. The NAR's chief economist added the pleasant thought, "An improving housing market and job growth will go hand in hand. The housing recovery will mean faster job growth." Let's hope he's right!

 Review of Last Week

 The Wall Street bulls sent stocks higher for another week. The Dow-Jones Industrial Average stayed above the 12,000 threshold it crossed the prior week, the broadly-based S&P 500 shot up 1.4% and the tech-heavy Nasdaq saw a 3.1% gain, which would be impressive in any economic environment. Investors are feeling better about the economy, even though last week included some things which certainly would cause economic worry in more bearish settings.
We can start with Egypt, which was all over the news media, but had little visibility to the investment community. Before the market closed Friday, President Mubarek stepped down, as stocks tapered off with a 44-point gain on the day. We also had China increasing its lending rates to slow down inflation and its economy. Here on our shores tech giant Cisco surprised analysts with a disappointing outlook. Their downside guidance came because they see pressure on their profit margins in the coming year.

For the week, the Dow ended UP 1.5%, at 12,273; the S&P 500 was UP 1.4%, to 1,329; and the Nasdaq shot UP 3.1%, ending at 2,809.

Bond prices suffered  as stocks continued to soar, all thanks to the positive economic news. Yields were up on most bonds as prices dipped though not too severely. The FNMA 4.0% bond we watch ended down just 22 basis points for the week, closing at $97.00. Mortgage rates did increase, with Freddie Mac's weekly survey of conforming mortgages showing national average fixed-rate mortgage rates up a bit but still in attractive territory, about the level they were at a year ago.

This Week’s Forecast

RETAIL, MANUFACTURING, HOME BUILDING, INFLATION... Happy Valentine's Day! Whatever parts of the economy you love, this week will have something to say about it. Tuesday's January Retail Sales are expected to continue their slow but steady growth, evidence the consumer is showing up to help out. February manufacturing should be up in both the New York Empire State Index and the Philadelphia Fed Manufacturing Index. January Industrial Production and factory Capacity Utilization are also projected to grow.

Home building is forecast to stay close to its present annual rate when we see Wednesday's Housing Starts and Building Permits reports for January.

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