Economic Update and Comment May 15

My Comment:

This is a standard weekly update I get from Lenders


The news all looks pretty good, but there is a shadow side. Realtors are wondering about
4 BIG THINGS.
1. Will demand for homes continue now that the federal tax break incentives are gone? The expectation at this time is that there will be some fall-off of demand, but not too much.
2. Will the lenders with huge inventories of REO (Real Estate Owned - by them) homes continue to parcel them into the marketplace at a moderate rate, thus holding up values? They seem to have figured this part out and will continue what they are doing.
3. Will the new government HAFA program (http://www.realtor.org/government_affairs/short_sales_hafa) flood the market with new, improved short sales? Lenders will now be required to offer that option to distressed home owners. Will the home owners even open the letter? We'll see.
3. When will interest rates/mortgages adjust upward? Not for awhile. There is a lot of interest in U.S. debt securities (flight from Europe, etc.) which underlie the mortgage rates. Talk of Fed pull-back of insuring mortgage is just talk. It's an election year. They are not going to risk further damage to the housing market.



Last Week in the News

The Commerce Department said wholesalers increased their inventories by 0.4% in March, following a 0.6% rise in February. Sales at the wholesale level rose a robust 2.4% in March, marking the 12th straight monthly gain.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications for the week ending May 7 rose 3.9%. Refinancing applications jumped 14.8%. Purchase volume decreased 9.5%.

The trade deficit increased 2.5% to $40.4 billion in March, from a revised $39.4 billion gap in February. Economists had expected the trade deficit to widen to $40.1 billion. Exports rose 3.2% to $147.87 billion. Imports increased 3.1% to $188.3 billion.

Retail sales rose 0.4% in April, following an upwardly revised 2.1% increase in March. Economists had anticipated retail sales to rise 0.2% in April. On a year-over-year basis, retail sales increased 8.8%.

Industrial production at the nation’s factories, mines and utilities increased 0.8% in April, following a 0.1% gain in March. It was the 10th consecutive monthly increase. The overall factory-operating rate rose to 73.7% of capacity in April, the highest reading since November 2008.

Total business inventories rose 0.4% in March, following an upwardly revised 0.5% increase in February. All components showed nearly uniform increases in March: manufacturers up 0.3%, retailers up 0.4%, wholesalers up 0.4%.

Initial claims for unemployment benefits fell by 4,000 to 444,000 for the week ending May 8. Continuing claims for the week ending May 1 rose by 12,000 to 4.627 million.

Upcoming on the economic calendar are reports on the housing market index on May 17, housing starts on May 18 and the index of leading economic indicators on May 20.Last Week in the News

The Commerce Department said wholesalers increased their inventories by 0.4% in March, following a 0.6% rise in February. Sales at the wholesale level rose a robust 2.4% in March, marking the 12th straight monthly gain.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications for the week ending May 7 rose 3.9%. Refinancing applications jumped 14.8%. Purchase volume decreased 9.5%.

The trade deficit increased 2.5% to $40.4 billion in March, from a revised $39.4 billion gap in February. Economists had expected the trade deficit to widen to $40.1 billion. Exports rose 3.2% to $147.87 billion. Imports increased 3.1% to $188.3 billion.

Retail sales rose 0.4% in April, following an upwardly revised 2.1% increase in March. Economists had anticipated retail sales to rise 0.2% in April. On a year-over-year basis, retail sales increased 8.8%.

Industrial production at the nation’s factories, mines and utilities increased 0.8% in April, following a 0.1% gain in March. It was the 10th consecutive monthly increase. The overall factory-operating rate rose to 73.7% of capacity in April, the highest reading since November 2008.

Total business inventories rose 0.4% in March, following an upwardly revised 0.5% increase in February. All components showed nearly uniform increases in March: manufacturers up 0.3%, retailers up 0.4%, wholesalers up 0.4%.

Initial claims for unemployment benefits fell by 4,000 to 444,000 for the week ending May 8. Continuing claims for the week ending May 1 rose by 12,000 to 4.627 million.

Upcoming on the economic calendar are reports on the housing market index on May 17, housing starts on May 18 and the index of leading economic indicators on May 20.