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INFO THAT HITS US WHERE WE LIVE… The housing market certainly got off to a good beginning this year. Existing Home Sales shot up 3.3% in January to a 5.69 million unit annual rate–their fastest sales pace since 2007! The National Association of Realtors chief economist commented, “challenges remain, but the housing market is off to a prosperous start.” Indeed, existing home sales are up a healthy 3.8% over last year. The challenges include low inventories, which have now fallen 20 months in a row, and a median price up 7.1% from a year ago, thanks to growing demand. But that should bring more on-the-fence sellers into the market to boost supply.

Let’s also note that mortgage rates are still extremely low by historical standards, incomes are increasing and the market will grow, as surveys show homeownership continues to be the American dream. New Home Sales also had a good beginning to the year, posting a 3.7% gain in January, to a 555,000 unit annual rate. Some negative types harped on the fact that this sales pace was less than expected, and still way below where we were pre-recession. But everyone knows this, and the trend is positive, with new home sales up 5.5% versus a year ago. Plus, our painfully slow economic recovery finally appears to be picking up steam.

>> Review of Last Week

STILL LOOKING UP… Investors believe the economy will soon be heading up at a faster rate, and that’s precisely the direction they continue to send stock prices. Friday, the Dow logged its 11th straight record setting trading day, the longest streak of record closings since 1987. Forget records–the Dow hasn’t seen 11 straight days of gains since 1992. The current performance made it three weekly gains in a row for the Dow, while the S&P 500 and the Nasdaq posted five weeks in a row of weekly increases. The S&P 500 also ended at a new record level, significant because it’s a way more broadly based index than the blue-chip Dow.

Economic reports were sparse during the holiday shortened week, but the ones we got were pretty good. Gains in the sales of existing homes and new homes for January are reported above. The final reading of the University of Michigan Consumer Sentiment index for February hit a better than expected 96.3. This was a tick down from January, but still a very strong indicator of a positive mood about the economy among average Americans.
FOMC Minutes from the last Fed meeting revealed a rate hike could happen fairly soon if forthcoming reports on inflation and the employment situation come in as the central bankers expect.

The week ended with the Dow UP 1.0%, to 20822; the S&P 500 UP 0.7%, to 2367; and the Nasdaq UP 0.1%, to 5845.

Bonds, including U.S. Treasuries, benefited from a decline in equities outside the U.S. This flight to safety boosted bond prices, as the 30YR FNMA 4.0% bond we watch finished the week UP .46, to $105.38. After dipping the week before, national average 30-year fixed mortgage rates remained essentially flat, rising just .01% (1 basis point) in Freddie Mac’s Primary Mortgage Market Survey for the week ending February 23. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up-to-the-minute information.

DID YOU KNOW?… Last year’s 1.17 million housing starts was the highest level of home building since 2007.

>> This Week’s Forecast

PENDING HOME SALES, CONSUMER SPENDING, INFLATION, MANUFACTURING ALL UP… Analysts are forecasting continued growth for Pending Home Sales in January, but at a slightly slower pace. Likewise, Personal Spending should be up, though not as much as the month before. The Fed’s favorite inflation measure, Core PCE Prices, is predicted to come in a little hotter, which is why more economists now think the central bank will hike rates in May instead of June. Nice to see manufacturing growing, both by the Chicago PMI and the national ISM Index.

>> The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

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This material is not from HUD or FHA and has not been approved by HUD or any government agency. Equal Housing Opportunity Lender

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