Weekly Update

[Adam in CO]

Volume 12, Number 24 Economic Highlights for the Week Ending June 23, 2006
Monday, June 19th The NAHB housing market index plunged to 42 in June from a reading of 45 in May. The index has declined for eight straight months reaching its lowest level since 1995. Home builders rated present and future sales rates of single family homes lower last month while foot traffic through model homes decreased. The level of the index suggests weaker construction and sales of new homes going forward. Fed funds futures traders are fully pricing in a quarter point rate hike at the end of this month based on higher-than-expected core consumer prices. That would bring the target for the fed funds rate to 5.25%. At the next FOMC meeting in August traders have pegged another rate raise at roughly 70%. Tuesday, June 20th Housing starts jumped 5.0% in May to an annual rate of 1.96 million units compared to expectations for a slight decline. The strength in new residential construction last month was surprising given waning home builders' sentiment and rising rates. This was the first gain in the last four months and does not reverse the downward trend currently in place. Single family starts increased 2.1% to an annual rate of 1.59 million units while multifamily starts gained an astonishing 19.7% to 370k. Housing starts partially rebounded in May after steep declines in the past three months. Housing permits, often used as a proxy for future activity, fell 2.1% in May indicating more slowing ahead. The housing market is displaying some volatility as it continues its soft landing. Deteriorating housing fundamentals such as rising rates, slowing sales and increasing inventories suggest the slowdown will continue in new residential construction. Wednesday, June 21st The MBA mortgage applications index slipped 0.8% to 567.6% for the week that ended June 16. Purchase applications were unchanged on the week while refinancings fell 2.2%. Mortgage application volume has been on a declining trend since the middle of last year and is now down 27.9% from a year ago. Thursday, June 22nd Mortgage rates jumped this week on increased rate hike expectations. A 25 bp rate hike is widely expected following the June 28-29 FOMC meeting with a high probability of another rate hike in August. 30-year fixed rate mortgages averaged 6.71% this week compared to 6.63% last week according to Freddie Mac's mortgage market survey. The index of leading economic indicators fell 0.6% in May compared to an expected 0.4% decline. Lower consumer expectations and the money supply, along with an increase in jobless claims accounted for most of last month's drop. Initial jobless claims have since retreated. The level of the index suggests economic growth will slow in the year ahead, but not abjectly. Jobless claims rose 11k to 308k for the week that ended June 17. Even with substantial volatility, initial claims appear to have settled back into the lower range of earlier this year suggesting a slower pace of layoffs and solid labor market conditions. Friday, June 23rd Durable goods orders slipped 0.3% in May after a sharp 4.7% drop in April. May's decline was due to another big drop in demand for civilian aircraft. Excluding transportation, orders rebounded 0.7% last month. These data suggest sluggish capital spending in Q2 compared to Q1. Durable orders while volatile are still trending higher but with much less momentum.
Stock Market Close for the Week Index Latest A Week Ago Change DJIA 10989.09 11014.55 -25.46 or -0.23% NASDAQ 2121.47 2129.95 -8.48 or -0.39%

WEEK IN ADVANCE A very busy economic calendar yields several events and indicators of importance this week. The 2-day FOMC meeting concludes with a policy decision on Thursday. A quarter point rate hike is widely expected. New and existing home sales on Monday and Tuesday provide the latest on the cooling trend in the housing market. Finally, the Treasury holds its monthly auction of 2 and 5 year notes. Key Interest Rates Latest 6 Mos Ago 1 Yr Ago Prime Rate 8.00 7.25 6.00 Fed Discount 6.00 5.25 4.00 Fed Funds 5.00 4.24 2.98 11th District COF 3.759 3.074 2.515 10-Year Note 5.22 4.45 4.00 30-Year Treasury Bond 5.25 4.54 4.21 30-Yr Fixed (FHLMC) 6.71 6.26 5.73 15-Yr Fixed (FHLMC) 6.36 5.79 5.32 1-Yr Adj (FHLMC) 5.75 5.22 4.42 6-Mo Libor (FNMA) 5.3215 4.5795 3.5314

Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco

[jfox]

Originally Posted by Adam in CO

...words...

Adam - Have you ever been in a real estate magazine?