Market Update -- For the Week of November 26, 2012

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QUOTE OF THE WEEK... "The great thing in the world is not so much where we stand, as in what direction we are moving."--Oliver Wendell Holmes, Sr., American physician, poet, professor, and author INFO THAT HITS US WHERE WE LIVE... We may not be standing in the middle of a fully recovered housing market, but we're clearly moving in that direction. Existing Home Sales were UP 2.1% in October, staying right near their highest level in over two years. Sales are up 10.9% from a year ago. The median price is now $178,600, up 11.1% over a year ago. And the supply of existing homes dropped from 5.6 to 5.4 months. The inventory of existing homes is down to 2.14 million, the lowest level since December 2002. Anyone who still thinks the housing market isn't in recovery had only to look at October Housing Starts, which grew 3.6% to an annual rate of 894,000 units. Multi-family starts were up 11.9% and are up 57.1% versus a year ago. Single-family starts dropped 0.2% for the month, but are up 35.3% over a year ago. Building permits dropped slightly in October, but are up 26.6% for single family and up 36.3% for multi-family units versus last year. Not surprisingly, the NAHB Homebuilders confidence index rose to its highest level in six years.  BUSINESS TIP OF THE WEEK... A simple sales pitch can be powerful. Think about the advantages you offer. Then focus on your target market's needs and explain how you meet them. Review of Last Week DOORBUSTERS HIT WALL STREET... On Black Friday, stocks were selling as hot as doorbusters, which on Wall Street means prices go UP. The Dow and the S&P 500 posted their best weekly gains since June 8, while the tech-heavy Nasdaq busted up an impressive 4%. It was a holiday-shortened week, with just three and a half days of trading. Investors were feeling good on Friday about data out of Germany and China, two recent sources of economic worry, while on the home front, Black Friday retail action raised everyone's holiday spirit.  Investors' spirits were also raised by their growing sense that a deficit reduction agreement will be reached to avoid the fiscal cliff of automatic tax hikes and spending cuts slated to kick in January 1. Falling off this cliff could send the economy back into recession according to economists, the Congressional Budget Office, and Fed Chairman Ben Bernanke who said so Tuesday in front of the Economic Club of New York. Meanwhile, Michigan Consumer Sentiment rose less than expected for November but still hit a five-year high and Leading Economic Indicators edged up slightly for October.  For the week, the Dow ended up 3.4%, to 13010; the S&P 500 was up 3.6%, to 1409; and the Nasdaq was up 4.0%, to 2967.  Even though economic data was mixed, traders were happy to head into risk assets, which sent stocks up and put bond prices under pressure. The FNMA 3.5% bond we watch ended the week down .08, at $106.09. Freddie Mac's weekly Primary Mortgage Market Survey showed national average fixed mortgage rates finding new record lows for the second week in a row. Not surprisingly, the Mortgage Bankers Association reported purchase loan applications UP 3% from the week before.  DID YOU KNOW?... Housing Starts, reported last week, are the number of residential building construction projects begun during a specific time period, typically a month. >> This Week’s Forecast HOME SALES, GDP, INFLATION, MIDWEST MANUFACTURING... The coming week reveals data on October New Home Sales, forecast virtually flat, plus October Pending Home Sales, a measure of signed contracts on existing homes, expected up a bit, good news for those sales a few months out. The second estimate of Q3 GDPeconomic growth is predicted to come in a tad better than first thought, at 2.8%. The Fed's favorite inflation measure, Core PCE Prices, which exclude volatile food and energy, should remain moderate. The Chicago PMI is forecast to just cross over 50, indicating expansion for Midwest manufacturing in November. >> 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 Nov 26 – Nov 30  Date Time (ET) Release For Consensus Prior Impact Tu Nov 27 08:30 Durable Goods Orders Oct –0.4% 9.8% Moderate Tu Nov 27 10:00 Consumer Confidence Nov 73.0 72.2 Moderate W Nov 28 10:00 New Home Sales Oct 388K 389K Moderate W Nov 28 10:30 Crude Inventories 11/24 NA –1.466M Moderate W Nov 28 14:00 Fed's Beige Book Oct NA NA Moderate Th Nov 29 08:30 Initial Unemployment Claims 11/24 395K 410K Moderate Th Nov 29 08:30 Continuing Unemployment Claims 11/17 3.325M 3.337M Moderate Th Nov 29 08:30 GDP–2nd Estimate Q3 2.8% 2.0% Moderate Th Nov 29 08:30 GDP Deflator–2nd Estimate Q3 2.8% 2.8% Moderate Th Nov 29 10:00 Pending Home Sales Oct 1.0% 0.3% Moderate F Nov 30 08:30 Personal Income Oct 0.2% 0.4% Moderate F Nov 30 08:30 Personal Spending Oct 0.1% 0.8% HIGH F Nov 30 08:30 PCE Prices–Core Oct 0.2% 0.1% HIGH F Nov 30 09:45 Chicago PMI Nov 50.7 49.9 HIGH >> Federal Reserve Watch    Forecasting Federal Reserve policy changes in coming months... With Fed Chairman Bernanke worrying about the fiscal cliff, no one sees the FOMC budging from their commitment to keep rates super low for quite some time. 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 Dec 12 0%–0.25% Jan 30 0%–0.25% Mar 20 0%–0.25% Probability of change from current policy: After FOMC meeting on: Consensus Dec 12      <1 p="p"> Jan 30      <1 p="p"> Mar 20      <1 p="p"> UIE

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