For the week of August 31, 2009-Brian E. Betts Realty Report!

Home Base
INFO THAT HITS US WHERE WE LIVE We continue to see signs of improvement in the housing market and last week showed us a surprising 9.6% increase in new single-family home sales for July. This was their steepest percent rise since 2005. New home sales are now at a 433,000 annual rate, up 31.6% from their January low. Even more significantly, inventory of unsold new homes plummeted to a 7.5 month supply from their 8.5 month level in June. This put inventories at 271,000, down over 52% from their mid-2006 peak, and at their lowest level since 1993. New home sales have now been up 4 months in a row, increasing since March at an annualized rate of more than 121%!

Prior to this good news, the Case-Shiller home price index reported a quarterly rise in prices for the first time in three years. The index also posted its second straight monthly increase, up 1.4% for the 20 metro areas it tracks. The Federal Housing Finance Agency's purchase-only index had home prices up 0.5% in June following a 0.6% rise in May. The FHFA index is up 0.5% for the first six months this year. Agency chief Edward J. DeMarco said: "This is further evidence that prices may be stabilizing for the nation as a whole."

Finally, the Mortgage Bankers Association reported mortgage applications for home purchases were up 1.0% last week over the week before. This was the fourth consecutive weekly gain for home-purchase applications.


>> Review of Last Week
UP A LITTLE MORE... The Dow went up eight days in a row before it slipped just 36 points on Friday. This was the venerable index's longest uninterrupted advance in over two years and, despite the small drop on Friday, it was still UP 0.4% for the week!

Tuesday saw consumer confidence come in at 54.1, way higher than the previous 47.4 reading. And Friday, the University of Michigan consumer sentiment for August hit 65.7, up nicely sfrom last month's 63.2. We also had durable goods orders up a healthy 4.9% for July. For the past three months there have been gains in these orders that are now showing up as increased shipments, which will boost Q3 GDP. As far as Q2 GDP is concerned, last week's preliminary reading was unchanged from the advanced reading of –1.0% and better than the expected –1.5%. This was helped by a consumer spending decline that was smaller than anticipated. Yay!

Please note that corporate profits in Q2 grew at an annual rate of 24.9%, following their 22.8% growth rate in Q1. And all the Q2 profit growth came from US operations, not revenues earned overseas. Some analysts feel it won't be long before these profits go into more US business investment and hiring. New claims for unemployment insurance dropped by 10,000 and continuing claims fell by 119,000. Finally, President Obama nominated Ben Bernanke for a second term as Fed Chairman, a move investors expected.

For the week, the Dow was UP 0.4%, to 9544.20; the S&P 500 inched UP 0.3%, to 1028.93; while the Nasdaq ended UP 0.4%, to 2028.77.

Bond prices did pretty well for the week, in spite of the big auction offerings that could have depressed prices but didn't. In fact, the price of the FNMA 30-year 4.5% bond we follow edged up from the previous week's $99.69 close, ending at $100.19. Mortgage interest rates were up slightly for the week, but still well within the historically low levels they've been at all year.


>> This Week’s Forecast
THE FACTORIES, THE FED, THE JOBS... Well, the start of the week features two good looks at the state of manufacturing, with the Chicago PMI and the ISM Index. Midweek, the FOMC Minutes should shed some light on the Fed's view of the economy at their last meeting. Then the week ends big with the August employment report. Many economic indicators are now picking up, but the jobs picture is always the last to brighten. Will we see some glimmers in the data?


>> 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.