For the week of February 15, 2010

INFO THAT HITS US WHERE WE LIVE

The National Association of Realtors last Thursday reported existing home sales UP 27.2% for the last three months of 2009 versus a year earlier. This amounted to a seasonally adjusted annual rate of 6 million homes. -- a 13.9% increase over the third quarter's annual rate of 5.29 million homes. Clearly, buyers are taking advantage of the low mortgage interest rates and the tax credit that was extended and expanded by Congress.

The existing home sales increase from Q3 to Q4 occurred in 48 states and D.C., with 32 of those states showing double-digit gains. Year-over-year, sales were higher in 49 states and D.C., up by double digits in all but 3 states. And distressed property made up just 32% of Q4 sales versus 37% of sales a year ago. The national median price of an existing single-family home, at $172,900, was down 4.1% year-over-year -- but that was the smallest price decline in over two years. Even better, out of the 151 metropolitan statistical areas studied, 67 of them showed a RISE in the median home price!

>> Review of Last Week
ROCK 'N ROLL... It was another raucous week in the stock markets, but this time the festivities ended with all three major averages headed UP! There wasn't a lot of US economic news to stir things up, so investors instead fretted over Greece. Stock prices went up and down with the news, but when all was said and done, Greece was promised the support of the European Union (EU), the International Monetary Fund (IMF), the European Central Bank and the European Commission. Sure sounds like enough help. We note there is no major US bank exposure in Greece. Investors also got shook about China tightening its credit situation, but, hey, they're just trying to prevent their double-digit economic growth from getting out of hand.

Wednesday saw the trade deficit for December come in at $40.2 billion, an increase of $3.8 billion over the prior month, but still $1.7 billion smaller than last year. Exports are actually up eight months in a row, growing at a 27.1% annual rate. Total international trade -- imports and exports --is up at a 31% annual rate since bottoming in April last year, and up at a 42% annual rate in the last three months.

The week ended on more good news. Retail sales were UP 0.5% in January (UP 0.8% including upward revisions to previous months). In the past six months retail sales are UP 7.9% at an annual rate and since September they've blasted UP 10.9%. Observers put this to personal incomes on the rise, a substantial reduction in consumer debt and the beginning signs of improvement in the job market. In line with this last point, initial unemployment claims fell to 440,000, with the four-week moving average now down to 469,000 -- around 100,000 lower than six months ago. Continuing claims are now down to 4.538 million.

For the week, the Dow was UP 0.9%, to 10099.14; the S&P 500 was also UP 0.9%, to 1075.51; while the Nasdaq surged UP 2.0%, to 2183.53.

Bonds endured an up-and-down week too, mimicking stocks but finally ending in the opposite direction -- down for the week. The FNMA 30-year 4.5% bond we watch ended down 50 basis points, closing at $100.91. Nevertheless, mortgage rates continued at their historically low levels. But homebuyers and owners looking to refinance should remember the Fed says it will stop buying mortgage bonds March 31. Experts feel this will send rates up a bit.

>> This Week’s Forecast
NEW READS ON HOMEBUILDING, THE FED AND INFLATION...Markets are closed Monday for Presidents' Day, then Wednesday we get a look at the mindset of homebuilders, with Housing Starts and Building Permits. The day will also reveal the FOMC Minutes from the Fed's last meeting in January. Thursday's PPI measures wholesale inflation. Then Friday we get the CPI consumer inflation reading that the Fed pays such close attention to.