Market Update: August 14, 2012

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I received this email from Craig Tiffany, a mortgage broker that works in this marketplace. The content is great, thanks for sending Craig.

Craig Tiffany
Loan Originator
3333 West Division Street #10
St. Cloud, MN 56301
Phone: (320) 491-9544

For the week of August 13, 2012 – Vol. 10, Issue 33

>> Market Update
QUOTE OF THE WEEK… “Actions are the seed of fate. Deeds grow into destiny.” –Harry S. Truman, 33rd President of the United States

INFO THAT HITS US WHERE WE LIVE… Some of the actions we’re seeing in the housing market should lead us to a better destiny. The National Association of Realtors (NAR) reported median sale prices for single-family homes posted year-over-year gains in Q2 in 110 of 147 markets. This is up from 74 markets showing annual price appreciation in Q1. The national median sale price of existing single-family homes in Q2 was up 7.3% over a year ago, the biggest annual increase in six years!

Total existing home sales in Q2 came in at a seasonally adjusted annual rate of 4.54 million. Many indicators point to a bottom forming — new home inventories are at historic lows, home builder sentiment has turned around and home prices have gone up, seasonally adjusted, 4 months in a row. But some economists still aren’t convinced we have momentum, the #1 driver of home prices. That’s because the #2 driver, the unemployment rate, is still up at 8.3%.

BUSINESS TIP OF THE WEEK… Always share the credit. When you do, co-workers and clients feel a sense of ownership in the idea or effort and a closer relationship with you.

>> Review of Last Week
CREEPING BULL MARKET… It certainly wasn’t a raging bull market — creeping is a more apt description of last week’s bullish move — yet stocks scored their fifth straight weekly gain. All three market indexes ended above psychologically important levels — the Dow above 13,000, the S&P 500 north of 1400 and the Nasdaq over 3,000! The equity market is seen as a leading indicator for the economy, so it’s good to see both currently going in the proper direction, albeit at a very slow and painful pace. Europe stayed quiet, but China disappointed with industrial output growth at a three-year low.

Over here, we had our now familiar you-win-some, you-lose-some economic readings. Initial Weekly Jobless Claims were down to 361,000, but Continuing Claims rose to 3.33 million. The June Trade Deficit came in lower than expected at $42.9 billion, but May was revised upward to $48.0 billion. Preliminary Q2 Nonfarm Productivity was at a 1.6% annual rate, not exactly booming, up only 1.1% over last year. Manufacturing Productivity was up at just a 0.2% annual rate, way lower than Q1. Oh, and the Federal Deficit? $69.6 billion for July!

For the week, the Dow ended UP 0.9%, to 13208; the S&P 500 was UP 1.1%, to 1406; and the Nasdaq was UP 1.8%, to 3021.

Treasuries, and bond prices in general, were under pressure last week, as the European debt melodrama delivered no big news, so investors headed back to riskier stocks. The FNMA 3.5% bond we watch didn’t do too badly, ending the week down just .14, at $105.12. National average mortgage rates were up slightly again, but still well below rates of a year ago.

DID YOU KNOW?… First-time home buyers, who have historically accounted for 40% of home purchases, bought 34% of all homes in Q2, up from 33% in Q1.

>> This Week’s Forecast
RETAIL SALES, INFLATION, MANUFACTURING, HOME BUILDING… This week features a little bit of everything economic including the monthly look at homebuilding. Thursday’s July Housing Starts and Building Permits should continue their upward slog. Retail Sales are expected back in growth territory for July, showing the consumer is still in the game.

Inflation, forecast at 0.2% for both wholesale (PPI) and consumer (CPI) prices, is a little hot but still within Fed guidelines. There are a slew of manufacturing reads — for August, the NY Empire Index is forecast down and the Philadelphia Fed Index looks to be negative, but overall Industrial Production for July is expected to show modest growth.

>> 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.

Economic Calendar for the Week of Aug 13 – Aug 17

Date
Time (ET)
Release
For
Consensus
Prior
Impact

Tu
Aug 14
08:30
Retail Sales
Jul
0.2%
–0.5%
HIGH

Tu
Aug 14
08:30
Retail Sales ex-auto
Jul
0.3%
–0.4%
HIGH

Tu
Aug 14
08:30
Producer Price Index (PPI)
Jul
0.2%
0.1%
Moderate

Tu
Aug 14
08:30
Core PPI
Jul
0.2%
0.2%
Moderate

Tu
Aug 14
10:00
Business Inventories
Jun
0.2%
0.3%
Moderate

W
Aug 15
08:30
Consumer Price Index (CPI)
Jul
0.2%
0.0%
HIGH

W
Aug 15
08:30
Core CPI
Jul
0.2%
0.2%
HIGH

W
Aug 15
08:30
NY Empire Manufacturing Index
Aug
5.0
7.4
Moderate

W
Aug 15
09:15
Industrial Production
Jul
0.6%
0.4%
Moderate

W
Aug 15
09:15
Capacity Utilization
Jul
79.3%
78.9%
Moderate

W
Aug 15
10:30
Crude Inventories
08/11
NA
–3.729M
Moderate

Th
Aug 16
08:30
Initial Unemployment Claims
08/11
368K
361K
Moderate

Th
Aug 16
08:30
Continuing Unemployment Claims
08/04
3.300M
3.332M
Moderate

Th
Aug 16
08:30
Housing Starts
Jul
763K
760K
Moderate

Th
Aug 16
08:30
Building Permits
Jul
770K
755K
Moderate

Th
Aug 16
10:00
Philadelphia Fed Manufacturing Index
Aug
–5.0
–12.9
HIGH

F
Aug 17
09:55
Univ. of Michigan Consumer Sentiment
Aug
72.2
72.3
Moderate

F
Aug 17
10:00
Leading Economic Indicators (LEI) Index
Jul
0.2%
–0.3%
Moderate

>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months… The Fed does not expect to raise the Funds Rate until late 2014. Economists don’t believe they’ll have to. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%–0.25%

After FOMC meeting on:
Consensus

Sep 13
0%–0.25%

Oct 24
0%–0.25%

Dec 12
0%–0.25%

Probability of change from current policy:

After FOMC meeting on:
Consensus

Sep 13
<1%

Oct 24
<1%

Dec 12
<1%

UIE

This e-mail is an advertisement for Craig Tiffany. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice, or a commitment to lend. Although the material is deemed to be accurate and reliable, there is no guarantee of its accuracy. The material contained in the newsletter is the property of PrimeLending, A PlainsCapital Company and cannot be reproduced for any use without prior written consent. It is designed for real estate and other financial professionals only. It is not intended for consumer distribution. The material does not represent the opinion of PrimeLending, A PlainsCapital Company. © 2012 PrimeLending, A PlainsCapital Company. Trade/service marks are the property of PlainsCapital Corporation, PlainsCapital Bank, or their respective affiliates and/or subsidiaries. Some products may not be available in all states. This is not a commitment to lend. Restrictions apply. All rights reserved. PrimeLending, A PlainsCapital Company (NMLS no: 13649) is a wholly-owned subsidiary of a state-chartered bank and is an exempt lender in the following states: AK, AR, CO, DE, FL, GA, HI, ID, IA, KS, KY, LA, MN, MS, MO, MT, NE, NV, NY, NC, OH, OK, OR, PA, SC, SD, TN, TX, UT, VA, WI, WY. Licensed by: AL State Banking Dept.- consumer credit lic no. MC21004; AZ Dept. of Financial Institutions- mortgage banker lic no. BK 0907334; Licensed by the Department of Corporations under the California Residential Mortgage Lending Act- lender lic no. 4130996; CT Dept. of Banking- lender lic no. ML-13649; D.C. Dept. of Insurance, Securities and Banking- dual authority lic no. MLO13649; IL Dept. of Financial and Professional Regulation- lender lic no. MB.6760635; IN Dept. of Financial Institutions- sub lien lender lic no. 11169; ME Dept. of Professional & Financial Regulation- supervised lender lic no. SLM8285; MD Dept. of Labor, Licensing & Regulation- lender lic no. 11058; Massachusetts Division of Banking– lender & broker license nos. MC5404, MC5406, MC5414, MC5450, MC5405; MI Dept. of Labor & Economic Growth- broker/lender lic nos. FR 0010163 and SR 0012527; Licensed by the New Hampshire Banking Department- lender lic no. 14553-MB; NJ Dept. of Banking and Insurance-lender lic no. 0803658; NM Regulation and Licensing Dept. Financial Institutions Division- lender license no. 01890; ND Dept. of Financial Institutions- money broker lic no. MB101786; RI Division of Banking- lender lic no. 20102678LL and broker lic no. 20102677LB; TX OCCC Reg. Loan License- lic no. 7293; VT Dept. of Banking, Insurance, Securities and Health Care Administration- lender lic no. 6127 and broker lic no. 0964MB; WA Dept. of Financial Institutions-consumer lender lic no. 520-CL-49075; WV Div. of Financial Institutions- lender license ML31704 and broker license MB-31703. PrimeLending, A PlainsCapital Company is an Equal Housing Opportunity Lender. NMLS# 474181

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Lake Winona: Alexandria, MN …Water Quality Tests

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Lake Winona

I picked this up at the Alexandria, MN Lakes Area Sanitary District yesterday. Thought it was interesting.

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Current Lakehome Inventory Levels for the Alexandria, MN Area

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For the first time in 7 years we appear to be having a significant drop in the inventory levels for the Alexandria, MN area. I track the Residential housing market daily here in my office and have since 2006 when the inventory levels went through the roof.

LAKEHOMES: What I have for 2012 is a high of 249 lakehomes listed in Douglas County on June 25th in the MLS. If you look at the numbers that I have compiled, they look like this:
2005: 233 Total in the MLS/—-data not available for Douglas County
2006: 375 Total in the MLS(7.26.06)/—- ”
2007: 417 Total in the MLS(7.30.07)/—- ”
2008: 402 Total in the MLS(8.13.08)/—- ”
2009: 413 “(8.26.09)/251 (8.26.06) Total listed in Douglas County
2010: 440 “(7.23.10)/268 (7.23.10) ”
2011: 434 “(8.08.11)/275 (8.08.11) ”
2012: —- /249 (6.25.12) ”

What this represents is a 9.45% drop in lakehome inventory at the highest daily level in a given year. The totals kept rising until this year, since 2006. The MLS inventory did a changeover to statewide data sharing and pulled in a lot of MLS systems within the state. I could no longer use the previous data collection method because of this changeover. So from now on, we will only be concerned with inventory in Douglas County for doing market comparisons.

I have been waiting to see a correction in the inventory levels since 2006. Some of this may have to do with sales volume. We will be able to get a better picture of the year after it is over.

Source: Greater Alexandria, MN Area Association of Realtors Multiple Listing Service

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Foreclosures in 2012 for Alexandria, MN: Douglas County

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Just talked with a representative from the Douglas County Sherrif Department. The report for today is 78 Sherrif sales for the period 1.1.2012 to 6.30.2012. There were 44 sales in the first quarter, 34 in the second quarter.

Source: Douglas County Sherrif Department

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Knute Nelson’s Grand Arbor WELLNESS CENTER in Alexandria, MN.

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Knute Nelson Wellness Center. PART ONE

Knute Nelson Wellness Center. PART TWO

What an incredible service to have available in this community. They have programs that, if you qualify, make the Wellness Center free of charge. Check out this exciting program that Knute Nelson offers to people. Thank you Knute Nelson for bringing this to Alexandria, MN.

Source: Knute Nelson, Grand Arbor of Alexandria, MN

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Consumer Confidence Report: JULY 2012

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Just Released today…some upward change…

The Conference Board Consumer Confidence Index® Increases After Four Consecutive Declines
31 Jul. 2012

The Conference Board Consumer Confidence Index®, which had declined in June, improved slightly in July. The Index now stands at 65.9 (1985=100), up from 62.7 in June. The Expectations Index improved to 79.1 from 73.4. The Present Situation Index, however, decreased slightly to 46.2 from 46.6 a month ago.

The monthly Consumer Confidence Survey®, based on a probability-design random sample, is conducted for The Conference Board by Nielsen, a leading global provider of information and analytics around what consumers buy and watch. The cutoff date for the preliminary results was July 19.

Says Lynn Franco, Director of Economic Indicators at The Conference Board: “Despite this month’s improvement in confidence, the overall Index remains at historically low levels. Consumers’ attitude regarding current conditions was little changed in July, but their short-term expectations, which had declined last month, bounced back. However, while consumers expressed greater optimism about short-term business and employment prospects, they have grown more pessimistic about their earnings. Given the current economic environment — in particular the weak labor market — consumer confidence is not likely to gain any significant momentum in the coming months.”

Consumers’ appraisal of current conditions eased in July. Those claiming business conditions are “good” declined to 13.8 percent from 14.2 percent, while those saying business conditions are “bad” decreased to 34.2 percent from 35.9 percent. Consumers’ assessment of the labor market was also mixed. Those stating jobs are “hard to get” declined to 40.8 percent from 41.2 percent, while those claiming jobs are “plentiful” decreased to 7.8 percent from 8.3 percent.

On the other hand, consumers were generally more optimistic about the short-term outlook in July. The percentage of consumers expecting business conditions to improve over the next six months rose to 18.9 percent from 16.0 percent, while those anticipating business conditions will worsen decreased to 14.6 percent from 15.8 percent. Consumers’ outlook for the labor market was also more upbeat in July. Those expecting more jobs in the months ahead increased to 17.6 percent from 14.8 percent, while those anticipating fewer jobs edged down to 20.3 percent from 20.8 percent. The proportion of consumers expecting an increase in their incomes, however, declined to 14.2 percent from 15.3 percent.

The next release is scheduled for Tuesday, August 28, 2012

Source: Conference Board

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Market Update: Monday, July 30, 2012

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Here’s the economic schedule for the week:

Welcome to perhaps the biggest week of the year for economic data and news. I think it is safe to say the big event for the week is the FOMC meeting concluding on Wednesday. There is speculation that the Fed will take another step in the direction of easing monetary policy. However, after the GDP report for Q2 and only having seen one payroll report since extending Operation Twist, the Fed is likely to hold off on a new asset purchase program. Instead, there are some that suspect they may push the “late-2014” language out to 2015. This could be an effective tool, but obviously is not as significant as a change in policy embarking on a whole new round of asset purchases. It appears that the Fed will either use the September FOMC meeting or wait until after the elections to decide if they will purchase more MBS securities. While the Fed meeting is a big event for the markets, Thursday’s ECB Governing Council meeting has taken on more importance after ECB President Draghi came out firing last week. Anticipating that some would challenge if the ECB could actually do enough to support the market, he confidently told the markets not to bet against him. It now appears that German Chancellor Merkel and French President Hollande may be on the same page with Draghi and there may finally be a coordinated, singular voice from policymakers. Draghi has proposed restarting bond purchases in the secondary market by the ECB to help bring down Spanish and Italian debt costs (quantitative easing). Finally, Friday will also bring the July employment reports. Early expectations are for total payroll growth of 100k and including 110k of private payroll growth. This would be slightly better than the June reports, but still would not be sufficient to bring down the unemployment rate. We will get more data on Wednesday from the ISM manufacturing report and the ADP employment change report.

Treasuries suffered some significant technical damage during last week’s late sell-off. Bull trend lines in place since March were broken and overbought daily and weekly momentum studies turned bearishly at last week’s close. The 10yr closed the week at 1.546%. Equities were having another depressing week until rallies on Thursday and Friday brought the Dow Jones up 253 points for the week, closing above 13,000 for the first time since May 7th. In early trading today, bond yields are just slightly lower (1.53%), while equities are posting small gains at the open. Friday’s plummet now casts a long shadow over the short-term charts. We have rebounded off the lows, although no new low has been set yet. With the 10yr currently sitting around 1.53%, we move support to 1.56%, then 1.63%; resistance sitting at 1.48%, then 1.45%. Most think there is a small chance that the Treasury market would sell-off before the Fed weighs in on Wednesday or before we see the new employment numbers on Friday. That could be true, but I have to believe that the price of disappointment in these bigger events is likely higher than that of new gains if the bond markets are given good news. So, I believe it to be smart to use rallies when you get them. With so many cross-currents going this week, the old saying goes……”It’s better to be a live dog than a dead lion”.

Source: Prime Lending; Craig Tiffany

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