Monthly Archives: January 2011

December Durable Goods Orders

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NAROFF ECONOMIC ADVISORS, Inc.

Joel L. Naroff

President and Chief Economist 

INDICATOR: December Durable Goods Orders

KEY DATA: Orders: -2.5%; Excluding Commercial Aircraft: 0.0%; Non-Defense, Non-Aircraft Capital Goods: +1.4% 

IN A NUTSHELL:  “The demand for capital goods on the part of business is still strong as it looks like investment will continue to boost growth.”  

WHAT IT MEANS:  Spending on big-ticket items, a key indicator of growth, seems to be holding up pretty well.  Yes, durable goods orders declined in December but that was due to a 99% drop in civilian aircraft orders.  It looks like there was only one order for a two seat Cessna.  Obviously, this is a very volatile component but for all of 2010, civilian aircraft orders were up a massive 66% compared to 2009 levels.  Excluding commercial aircraft, demand was flat in December.  More importantly, though, was the measure of corporate capital spending, which rose solidly.  Non-defense, non-aircraft capital goods orders posted a nearly 17% rise for all of 2010, a sign that businesses may not be hiring but they sure are getting their capital stock up to speed.  The December report, though, was decidedly mixed.  Orders for communications equipment, machinery and vehicles rose but were off for primary and fabricated metals, computers and electrical equipment and appliances.  In addition, backlogs slipped and inventories rose.  That is not the direction you want to see those categories go if you like expanding production.  

MARKETS AND FED POLICY IMPLICATIONS: This was a decent though not spectacular report.  Critically, businesses are spending money on capital goods and while that negates some of the need for workers, it still is a sign that the economy is moving forward.  Investors will like this report but there was a huge weather-driven surge in new unemployment claims that may raise some eyebrows.  The claims data have been bouncing around much more than normal with horrible weather (I am looking at about eighteen inches of snow outside my house) and government policy flip-flops messing up the normal patterns.  Thus, don’t take the rise as pointing to a weakening in the labor market.  But it is a warning that job growth remains softer than anyone would like and that is restraining consumer spending and overall economic growth.  The FOMC focused on that problem in yesterday’s meeting statement.  The January jobs report is a week away so let’s wait and see what comes out of those numbers.  If there is any warning, it is that weather could play a major role in keeping the gains down.

Re/Max Connection Realtors disclaimer:
Re/Max Connection Realtors are not licensed financial advisors, and are not providing any financial advise, you should consult with a licensed financial advisor prior to making any financial decisions. Re/Max Connection Realtors are only providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.
Our company accepts no liability for the content of this email/blog, or for the consequences of any actions taken on the basis of the information provided. Any views or opinions presented in this email/blog are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this email and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this email.
Re/Max Connection Realtors, 1000 East Lincoln Drive, Suite 2, Marlton, NJ 08053 www.goconnectionnj.com

January 26, 2011 FOMC Decision

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NAROFF ECONOMIC ADVISORS, Inc.

Joel L. Naroff

President and Chief Economist 

January 26, 2011 FOMC Decision 

“…the economic recovery is continuing, though at a rate that has been insufficient to bring about a significant improvement in labor market conditions.”

 Rate Decision: Fed funds rate maintained at a range between 0% and 0.25%

The FOMC met again and what they did for two days is anyone’s guess.  Clearly, even the wordsmiths at the Fed couldn’t have had their time completely taken up by the modest but hardly substantial changes in the statement.   The members noted at the start that “the economic recovery is continuing, though at a rate that has been insufficient to bring about a significant improvement in labor market conditions.”  That points up the continued obsession with jobs and the unemployment rate.  Until employment growth is clearly at a sustainable level that will reduce the unemployment rate, this Fed will be loathe to change policy.  But there were cautious views about consumer spending and business investment as well. 

 Once again, the Fed stated that economic conditions “are likely to warrant exceptionally low levels of the federal funds rate for an extended period.”   The basis for this stance remains the low inflation rate.  As long as the Committee can continue to write that “longer-term inflation expectations have remained stable, and measures of underlying inflation have been trending downward”, there is little the inflation hawks can truly bleat about.  Of course that could mean a rise in core inflation would create some real issues for the FOMC.  So watch the core, regardless of your views on whether food and energy matter (I think they do) and if it starts to accelerate on a consistent basis, look for some of the members to start dissenting again. 

 As for the QE2, not surprisingly it is being continued and I expect the full $600 billion of purchases to be made.  But when we get to the late June meeting, the FOMC will have to deal with the completion of the program.  Don’t be surprised if there are no more purchases but the Committee continues “its existing policy of reinvesting principal payments from its securities holdings”.   In essence, stage one of the withdrawal of liquidity will come with the end of the quantitative easing program, state two will be the end of the reinvestment of principal and state three will be direct withdrawals of liquidity and rate hikes.  That last stage will not likely occur before late this year.

Re/Max Connection Realtors disclaimer:
Re/Max Connection Realtors are not licensed financial advisors, and are not providing any financial advise, you should consult with a licensed financial advisor prior to making any financial decisions. Re/Max Connection Realtors are only providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.
Our company accepts no liability for the content of this email/blog, or for the consequences of any actions taken on the basis of the information provided. Any views or opinions presented in this email/blog are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this email and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this email.
Re/Max Connection Realtors, 1000 East Lincoln Drive, Suite 2, Marlton, NJ 08053 www.goconnectionnj.com

December Existing Home Sales

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NAROFF ECONOMIC ADVISORS, Inc.

Joel L. Naroff

President and Chief Economist

INDICATOR: December Existing Home Sales

KEY DATA: Sales: +12.3%; 2010 Annual: -4.8%

 IN A NUTSHELL:   “With the confusion from the government’s buyers’ incentives finally a thing of the past, it appears that the housing market is getting better.”

 WHAT IT MEANS:  The weakest link may be finally eating some spinach.  Existing home sales soared in December wiping out the downturn that appeared after the first time/long time buyers’ incentives disappeared.  It looks like buyers are coming in to the market and that is occurring throughout the nation.  Every region posted double-digit gains.  The National Association of Realtors noted that distressed homes made up a significant portion of the sales with the percentage rising to 36% from 33% in November.   Prices eased back but largely because of a sharp drop in the West where foreclosures are the way to go.  There were increases in prices in the Midwest and South and a minimal decline in the Northeast.  For the year as a whole, median home prices rose a modest 0.3%.  Still, they were up.  The inventory of homes fell with the number of houses available down and the months of supply also off.  

 MARKETS AND FED POLICY IMPLICATIONS: This was a solid report that points to a firming in the housing market, at least for existing homes.  Clearly, distressed properties are a critical part of the recovery as those homes generally sell at a significant discount.  That makes it difficult for new home builders to compete and that part of the market will likely continue to lag.  Investors are becoming a very significant part of the market as they bought about 20% of the properties in December, according to the National Association of Realtors.  That is a good thing as the inventory has to be reduced.  Investors are not simply flipping the homes but are often renting them out, matching need with supply.  This is a valuable part of the process of working through the excess number of homes built last decade.  The sooner that happens, the quicker the housing market will return to normal.  This report is another in a long line that point to the recovery improving and investors and members of the Fed should read it that way.

Understanding The Closing Process

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Understanding The Closing Process

Once your loan is approved, you will be ready to take the final step that will lead to the door of your new home.  Many homebuyers are intimidated by the closing process, but it’s not as complicated as you may think.  In fact, finding the right home is much more difficult than closing the deal.

Making It Official

The closing process begins with the borrower and lender meeting in the presence of a notary public.  This is a person who is authorized to oversee, create or certify contracts, deeds and other legal documents.  At the conclusion of the signing, the notary public will provide their stamp and signature, which certifies the identification of everyone present and the signatures on the loan application.

Handing Over The Cash

When you meet with the lender to close the loan, you will be required to produce your down payment and, if required, the closing costs.  Ask your lender about acceptable payment methods, which may include a cashier’s check or other certified funds.  If you have an account with the lender, a personal check may be accepted in some circumstances.

Review The Loan Documents

At closing, this will be your final opportunity to review the loan documents.  You should make sure that everything is accurate and as promised, including the interest rates and loan term.  It’s also important that you confirm that the names and addresses are correct, along with other important information relating to the loan.  If anything is inaccurate, now is the time to make changes.  Never sign the loan documents until everything is perfect.

Sign Here, Please

Once everything is verified and the loan documents are approved by both you and the lender, it’s time to sign on the dotted line.  Believe it or not, this is one of the most nervous times for a homebuyer.  If you’ve chosen the right home and are comfortable with your loan, however, it can also be one of the most exciting.  Once the documents are signed, the notary public will affix his/her stamp and signature.

It’s A Done Deal

The final step in the closing process is a simple handshake.  Most lenders and homebuyers will extend their hands and, with a smile, the person who was just a homebuyer is now a homeowner.  Now that’s something to shake on!  With the keys to your abode now firmly in hand, it’s time to get moving and turn your new house into a home.

“When purchasing, selling or refinancing a home you should always consult with an attorney at law licensed in the State you are doing the closing, Guardian Settlement Agents, Inc. is not giving legal advice and will not give legal advice.  Guardian Settlement Agents, Inc. is a licensed title insurance agency in the State of NJ and in the Commonwealth of PA, we are not attorneys.”

From the Desk of:

Christopher J. Brown C.E.O.