March Housing Starts and Permits

NAROFF ECONOMIC ADVISORS, Inc.

Joel L. Naroff
President and Chief Economist

INDICATOR: March Housing Starts and Permits

KEY DATA: Starts: up 7%; 1-Family: -4.8%; Multi-Family: +31.1%; Permits: down 3.9%

IN A NUTSHELL: “Housing starts soared but the momentum may not be sustained as builders are taking out permits for new construction much more cautiously.”

WHAT IT MEANS: Wow. For the first time since June 2008, housing starts breached the one million units annualized pace. That is really good news as it points to strong construction activity, a key to stronger growth. The large increase was posted despite a slowdown in the Northeast. The Midwest and South were up about ten percent but the West rose much more modestly. Still, I am not irrationally exuberant about this report. First, all the gain came in the multi-family segment of the market. It would be nice if all components were up but I am not that worried since the data do bounce around. What concerns me are the permit numbers. They were down and for the past two months are running well below the construction pace. Also, the number of permits authorized but not yet used is also trending downward. Finally, both the number of homes under construction and that have been completed are up. Softer permit demand, lower permit inventory and higher supply do not bode well for future construction activity.

MARKETS AND FED POLICY IMPLICATIONS: This was a great report as far as first quarter GDP is concerned. Housing should add solidly to growth and we could be looking at a three percent rate. But the details are a concern for spring activity. I suspect we will see some slowing in residential construction though not a major turn down. In other words, don’t expect us to be above one million units on an annualized basis again for a while. With consumer confidence questionable, the tax increases and sequestration cuts kicking in, the outlook is for slower second quarter economic activity. That said, this is positive news for investors, who have to digest good inflation numbers but not so great manufacturing production data. Add that to the tragedy in Boston, where I lived for three years, and yesterday’s massive sell-off and who knows where the markets will go in the next few days.

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RE/MAX Connection Realtors is not a licensed financial advisor and is not providing any financial advice. You should consult with a licensed financial advisor prior to making any financial decisions. RE/MAX Connection Realtors only is 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 Lincoln Drive East, Suite Two, Marlton, NJ 08053 www.goconnectionnj.com

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March Supply Managers’ Manufacturing Index

NAROFF ECONOMIC ADVISORS, Inc.

Joel L. Naroff
President and Chief Economist

INDICATOR: March Supply Managers’ Manufacturing Index

KEY DATA: ISM (Manufacturing): 51.3 (down 2.9 points); New Orders: down 6.4 points: Production: down 5.4 points: Employment: up

IN A NUTSHELL: “With the tax increases and sequestration-driven spending reductions starting to kick in, some of the projected negative impacts may be starting to show up.”

WHAT IT MEANS: The February data were better than expected but we are now into the March numbers when the sequestration government spending slowdown was starting and the cumulative impacts of tax increases eating to disposable income were expected to moderate spending. That just might be the happening. Manufacturing activity, while still growing, did so a lot less robustly in March that the previous month. Of concern was the sharp deceleration in order growth and output. In addition, backlogs grew more slowly, which is not good news for future production levels. Despite all that, firms actually hired more rapidly. That is an indication that maybe there is some technical issues going on here.

MARKETS AND FED POLICY IMPLICATIONS: Why would firms hire more people in the face of falling demand? There is an answer and while it is a bit technical, it makes sense. The January and February data may have been skewed by the uncertainties caused by the fiscal cliff. Orders and production rose solidly those two months but the reason may have been a temporary slowdown to the previous months to guard again potentially going off the cliff. Once we passed that crisis, firms had to make up for lost time and did so the first two months of the year and by March, they had reached more sustainable levels. That would mean the March numbers are more “real” but not necessarily a sign of weakness. We will not know if the March decline was just an adjustment issue or an evolving trend until we see the April report. My view is that it is a little of both. We are beginning to see where the government spending cuts will reduce demand and in those sectors and parts of the country that will feel the wrath of sequestration, adjustments are being made. But it is early in the process so we should not be seeing a whole lot yet from sequestration. Also, lower and middle-income households who are hurt the most by the tax increases can sustain spending levels only for so long. Ultimately, they will have to cut back but once again, that is a slow process. Thus, some of the slowdown may be due to moderating spending, but it should not have created such a large drop in the new orders index. The remainder of the fall off should be ascribed to the adjustment from the fiscal cliff crisis. Regardless, investors have to looking for signs that this great rally may finally face a correction. This report is a warning but with the employment report coming on Friday, I don’t think it will have a large impact on the markets.

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RE/MAX Connection Realtors is not a licensed financial advisor and is not providing any financial advice. You should consult with a licensed financial advisor prior to making any financial decisions. RE/MAX Connection Realtors only is 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 Lincoln Drive East, Suite Two, Marlton, NJ 08053 www.goconnectionnj.com

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February Income and Spending

NAROFF ECONOMIC ADVISORS, Inc.

Joel L. Naroff
President and Chief Economist

INDICATOR: February Income and Spending

KEY DATA: Consumption: +0.7%; Inflation Adjusted: +0.3%; Disposable Income: +1.1%

IN A NUTSHELL: “The improving job market is overcoming tax increases, allowing incomes and spending to rise.”

WHAT IT MEANS: Surprise, surprise, households are still spending money like crazy. Consumption rose sharply in February on top of a solid gain in January. Importantly, demand for services, which is two-thirds or all spending, is starting to show signs of life. This component had been moribund for a long time and it is hard to post large increases in consumer demand if the bulk of spending is weak. Households also spent money at retail stores but largely flat vehicle purchases kept down gains in the durable goods purchases. The rise in demand was powered by a strong increase in income. Businesses had loaded bonuses and dividends into the end of 2012 in order to beat the expected tax increases so it was not surprising the January’s income was down a lot. There was some negative impacts in February as well, which makes the large rise in disposable income so impressive. You can create rising wage and salary income from either higher wages or more people working and while the wage gains are slowly improving, it was the jump in jobs that powered the income increase in February. Also, improving corporate balance sheets are leading to increased dividend payouts and that helped dramatically as well. There was so much income added during the month that despite the rise in spending, savings and the savings rate rose. So, we had rising income, rising spending and rising savings. You can’t ask for much more.

MARKETS AND FED POLICY IMPLICATIONS: Do tax increases slow an economy down? Of course. But other factors are at work now and they are overcoming the negative impacts of the fiscal cliff deal. Whether the spending can be sustained is a wholly different issue. The effects of ending the payroll tax holiday will build, especially for lower and middle-income households. Indeed, the savings rate did increase but the level is still quite low, indicating some households may already be dipping into their rainy day funds. Second, sequestration is likely to mean furloughs for government workers. That will lower incomes and slow spending. Reduced federal spending will be felt by government suppliers who will have to cut back, lowering incomes and demand. While it may look right now as if there have been few negative effects of the government’s attack on the economic recovery, wait a while. It is coming. The point is, we could have had really strong growth if negative fiscal policy hadn’t gotten in the way. As it is, growth will continue, but be more moderate and if the sequestration lasts the whole year, it could be disappointing especially when compared to what it might have been. As for the markets, they are closed today but investors should be buoyed by the strong data.

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RE/MAX Connection Realtors is not a licensed financial advisor and is not providing any financial advice. You should consult with a licensed financial advisor prior to making any financial decisions. RE/MAX Connection Realtors only is 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 Lincoln Drive East, Suite Two, Marlton, NJ 08053 www.goconnectionnj.com

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February Housing Starts and Permits

NAROFF ECONOMIC ADVISORS, Inc.

Joel L. Naroff
President and Chief Economist

INDICATOR: February Housing Starts and Permits

KEY DATA: Starts: +0.8%; 1-Family: +0.5%; Permits: +4.6%; 1-Family: +2.7%

IN A NUTSHELL: “As goes the housing market, so goes the economy and the signs are looking good for both.”

WHAT IT MEANS: The housing market took away and now seems to be giving back as the recovery in this sector continues. Construction of new homes picked up in February, hitting the second highest since July 2008. Only the December 2012 pace exceeded the February starts rate and that may have been hyped by warmer than normal weather. Both single-family and multi-family construction rose with the single-family component replacing the December rate as the highest number since July 2008. Regionally, the gains were not evenly spread. Starts soared in the Midwest by nearly 40% and by almost 20% in the Northeast where Sandy reconstruction is starting to pick up. But there were moderate declines in the South and West. Still, these data do bounce around and the trend across the nation is up. Looking forward, a spike in housing permits points to greater construction activity in the months to come. Interestingly, the biggest gains in permit requests were in the West and South, implying that the February drop was only a temporary slowdown.

MARKETS AND FED POLICY IMPLICATIONS: Housing crashed the economy and is now leading it forward. The rise in housing starts comes even as the National Association of Home Builders/Wells Fargo index of builder confidence has been moderating lately. Interesting, the falling confidence is not coming from a decline in demand. The opposite is occurring. It is due to the roadblocks to selling new homes, including low appraisals and continued strict credit requirements. There are also complaints about rising material and labor costs as well as supply chain bottlenecks. Those cost issues may be troubling to builders but to me they are sings of a growing sector. Importantly, confidence and construction are not going in the same direction. Not only are starts rising but the number of home permitted but not started is increasing as well. Since developers are not spending money on permits unless they are pretty certain they will be using them soon, the increasing inventory of permits says to me that builders expect activity to accelerate. That bodes well for an economy that will be facing the headwind of sequestration. If it is allowed to continue, and it looks like it will, the impacts will start building as we go through the spring. The softening in activity created by the spending reductions will not be enough to kill the recovery, but it will slow it down. Of course, there will be those who say that since the economy continued to grow, all those arguments about spending cuts hurting growth are false. That will be just as silly as arguing that since the economy continued to grow even after the tax increases were implemented, raising taxes doesn’t hurt the economy. Imagine where we would be if neither took place. Regardless, investors who are concerned about the economy should be buoyed by this report though the crazy decision to tax deposits in Cypress will hang over the markets until it is clear what the impact will be on depositors’ confidence in other weak bank nations.

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RE/MAX Connection Realtors is not a licensed financial advisor and is not providing any financial advice. You should consult with a licensed financial advisor prior to making any financial decisions. RE/MAX Connection Realtors only is 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 Lincoln Drive East, Suite Two, Marlton, NJ 08053 www.goconnectionnj.com

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February Employment Report

NAROFF ECONOMIC ADVISORS, Inc.

Joel L. Naroff
President and Chief Economist

INDICATOR: February Employment Report

KEY DATA: Payrolls: +236,000; Private Sector: +246,000; Unemployment Rate: 7.7% (down 0.2 percentage point)

IN A NUTSHELL: “So far so good as rising taxes and sequestration concerns have yet to kill the economy.”

WHAT IT MEANS: Yesterday I warned that the surprise in the employment report was likely to be on the upside but even my forecasts, which were at the top end of the estimates, did not come close to the job gains we saw in February. The payroll numbers were really good. Not only was total employment up sharply but the increases were spread across the entire economy. The rebounding housing market helped build up the increases in construction while manufacturing continues to expand. Health care, education, retail, finance, professional services, leisure and hospitality all posted solid gains. Over sixty percent of the industries posted rises in their employment levels. But more importantly, wages and especially hours worked were up solidly. This implies that income gains should be strong. As for the unemployment rate, it hit its lowest level since December 2008. You can complain all you want about the labor force declining, the reality is that the number of people unemployed is falling and is down over six percent since February 2012. The only negative I found in the report was in the number of people who could only find part-time work. While it was down in February, it was still up compared to a year earlier.

MARKETS AND FED POLICY IMPLICATIONS: This was a report better than was hoped for by a wide margin. But the real question is whether it can be sustained. The impacts of the tax increases will be starting to take effect soon while sequestration’s harm will be showing up as we move through the spring and especially into the summer. Thus, while the economy appears to be gaining some momentum right now, the sand in the gears is Washington. Restrictive fiscal policy is not called restrictive fiscal policy for no reason at all. There is no such thing as a free tax increase or spending cut. They both slow growth and they both are at work, thanks to our thoughtful, caring political leaders. Thus, while we could see job gains stay decent for a little while, don’t expect the February report to be reproduced too often this year if sequestration last the rest of the fiscal year. This report creates a dilemma for investors. Strong job growth would imply an economy that is changing gears, which is good news for earnings. But continued improvement in the labor market would lead to the Fed ending its steroid injections into the markets sooner than expected. That is not good, at least for prices. So how the markets move on this report is anyone’s guess as it is impossible to know how long sequestration will last making its impact on the economy, job growth and Fed policy uncertain.

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RE/MAX Connection Realtors is not a licensed financial advisor and is not providing any financial advice. You should consult with a licensed financial advisor prior to making any financial decisions. RE/MAX Connection Realtors only is 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 Lincoln Drive East, Suite Two, Marlton, NJ 08053 www.goconnectionnj.com

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December New Home Sales

NAROFF ECONOMIC ADVISORS, Inc.

Joel L. Naroff
President and Chief Economist

INDICATOR: December New Home Sales

KEY DATA: New Home Sales: down 7.3%; 2012 Sales: up 19.9%; 2012 Median Prices: up 7.2%

IN A NUTSHELL: “Despite the fallback in sales in December, the housing market recovery remains on track.”

WHAT IT MEANS: December was not a good month for builders as new home demand dropped sharply. A nearly thirty percent decline in the Northeast could be explained by the lingering effects of Sandy. However, the South and West were also off so it was not just one area being flooded out. Still, the decline must be looked at cautiously as there was a nearly six percent upward revision to the November sales pace. That could indicate an acceleration in sales over the course of the month and we just might see similar revisions in the months ahead. Also, the sales pace does jump around and it is hard to quibble with a nearly twenty percent surge in demand between 2011 and 2012. More importantly, prices continue to rise. For all of 2012, the median price was up just over seven percent but from December 20122 to December 2012 the gain was nearly nine percent. It looks like the price increases are accelerating.

MARKETS AND FED POLICY IMPLICATIONS: While it was disappointing to see a decline in new home sales in December, given the volatility of the numbers and the influence of Sandy in the Northeast, the drop is not something to worry about. Prices are rising and while more homes are coming on the market, the supply is still not great. We are likely to see those trends continue and that is good news as it means prices of both new and existing are going up which adds to equity and ultimately more housing activity. With unemployment claims at levels that point to stronger job growth and mass layoffs likely to have peaked after the fiscal cliff scare, the labor market improvement should work in concert with the rising house prices to raise consumer confidence and spending. The tax hikes already implemented and the looming spending cuts do mean that the federal government will be restraining growth this year but additional business, consumer and even state and local government spending should overcome that hurdle. I remain very optimistic about economic growth this year.

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RE/MAX Connection Realtors is not a licensed financial advisor and is not providing any financial advice. You should consult with a licensed financial advisor prior to making any financial decisions. RE/MAX Connection Realtors only is 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 Lincoln Drive East, Suite Two, Marlton, NJ 08053 www.goconnectionnj.com

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December Existing Home Sales

NAROFF ECONOMIC ADVISORS, Inc.

Joel L. Naroff
President and Chief Economist

INDICATOR: December Existing Home Sales

KEY DATA: Sales: down 1.0%; Sales (’12 vs. ’11): up 9.2%; Prices (‘12 vs. ’11): up 6.3%

IN A NUTSHELL: “The housing market turned the corner in 2012 and the small pull back in sales in December does not detract from that fact.”

WHAT IT MEANS: Housing is back from the dead and it is not a Zombie. The National Association of Realtors reported that demand for existing homes eased a touch in December but that is not a major issue. There was a sharp increase in November and the modest drop hardly points to a slowing in the market, especially since it was the second highest pace since November 2009 when the federal tax rebate was about to end. Yes, there were expectations that sales would rise but we have seen an up and down monthly pattern all year, so chill. Activity varied across the nation with the Northeast and West posting solid increases but the South and Midwest experiencing a softening in sales. But the eye-opener in the report was the disappearance of supply. The number of homes on the market fell to the lowest level since January 2001. When supply is adjusted for the sales pace, we hit an inventory not seen May 2005. In other words, there are not enough homes on the market and that is leading to a surge in home prices. Between December 2011 and December 2012, median prices were up 11.5% with the West posting an enormous 17.3% gain. With few houses to choose from, don’t be surprised if mini-bidding wars break out. That could get the fence sitters attention and trigger even more sales.

MARKETS AND FED POLICY IMPLICATIONS: The housing market is continuing to progress at a solid pace and with prices now rising, the impacts should start spreading from just construction and related products to consumer confidence and spending. Homes will be moving from underwater to positive equity, increasing refinancings and improving household balance sheets. Thus, while tax increases and spending cuts (whatever they turn out to be) will slow growth this year, consumer demand does not have to be weak. Businesses will get over the fiscal cliff and debt ceiling fears and will start using all the cash they have. And once we have that attitude change (get those CEOs to a happy hour quickly) investment, the major drag on the economy, will rise. That will also lead to an increase hiring, adding to income and spending as well. We could still post good growth this year despite the attempts of government to prevent that from happening.

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RE/MAX Connection Realtors is not a licensed financial advisor and is not providing any financial advice. You should consult with a licensed financial advisor prior to making any financial decisions. RE/MAX Connection Realtors only is 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 Lincoln Drive East, Suite Two, Marlton, NJ 08053 www.goconnectionnj.com

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A Message from Christopher J. Brown / December Housing Starts and Permits & Weekly Jobless Claims

A message from RE/MAX Connection CEO Christopher J. Brown:

“As the housing market continues to make strides, the employment rate in New Jersey will improve and home sales and construction will lead the way in 2013. You can’t have meaningful job creation without the housing market and this most recent economic report illustrates that marriage.”

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Naroff Economic Advisors, Inc.

Joel L. Naroff
President and Chief Economist

INDICATOR: December Housing Starts and Permits/Weekly Jobless Claims

KEY DATA: Starts: +12.1%; 1-Family: +8.1%; Permits: +0.3%; 1-Family: +1.8%/ Jobless Claims: 335,000 (down 37,000)

IN A NUTSHELL: “The housing sector has moved to the head of the class, helping generate more growth that is firming up the labor market.”

WHAT IT MEANS: That massive economic slowdown that most had been predicting for the last quarter of 2012 does not look to have occurred. We have already seen that retail sales were better than expected and now it is clear that residential construction really picked up. Housing starts soared in December to its highest level since June 2008. For all of 2012, new construction of all types of units rose an incredible 28% with single-family activity up over 24% and multi-family rising 37%. The gains in December were broad based with only the South posting a single-digit rise. For all of 2012, only in the Northeast were increases less than 27.5%. But with Sandy destroying so many homes, I suspect that part of the nation will lead the way in 2013. Looking forward, permit requests rose modestly and were lower than actual starts. That points to a small pull back in construction early this year. Any softening in construction is not likely to be large or long-lasting because the number of units that have permits already requested but not started continues to grow.

The strength in the housing market may be starting to have an impact on the labor market. Jobless claims plummeted last week. Yes, these data are awfully volatile and I suspect a jump in next week’s number, but the trend is still down. The two week and four week averages have come down below 360,000 and that points to improving job gains and a further slowing in layoffs.

MARKETS AND FED POLICY IMPLICATIONS: Both the housing starts and jobless claims numbers are examples of why we should not focus simply on just one data point. The starts may have been boosted by unseasonably warm weather while the claims drop may just be a quirk of the hiring/firing pattern in the post-holiday period. In addition, some firms may have reduced their workforces prior to the end of the year in order to protect against a possible fiscal cliff disaster. Who knows? But while the changes may have been outsized, the trends make sense. Despite the fears of the cliff, every sector related to the consumer, retailing, vehicles and housing, did well in December. That tells me the economy posted decent growth in the fourth quarter with only the paranoid business community following up on their fears. Indeed, with the absurd debt ceiling cliff hanging over CEOs heads, they will probably do little investing in the first quarter as well. But once we clear that hurdle – I continue to believe Members of Congress are not totally irrational – business spending, hiring and confidence will all jump. That sets us up for a better spring and a potentially strong second half of this year, even in the face of tax increases and spending cuts.

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RE/MAX Connection Realtors is not a licensed financial advisor and is not providing any financial advice. You should consult with a licensed financial advisor prior to making any financial decisions. RE/MAX Connection Realtors only is 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 Lincoln Drive East, Suite Two, Marlton, NJ 08053 www.goconnectionnj.com

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November Existing Home Sales

NAROFF ECONOMIC ADVISORS, Inc.

Joel L. Naroff
President and Chief Economist

INDICATOR: November Existing Home Sales/October FHFA Home Prices

KEY DATA: Homes Sales: +5.9%; One-Family: +5.5%; Condos: +9.1%/FHFA Prices: +0.5%

IN A NUTSHELL: “The drum beat of better housing conditions just keeps getting stronger.”

WHAT IT MEANS: This is a broken record: The housing market is the leading light of the economy. Existing home sales surged in November. This is the highest pace in three years, when the federal government’s tax credits were about to end. Demand for both single-family and condos was strong while the increases were spread fairly evenly across the nation. The gain in the West was somewhat limited and that region remains the only laggard. The supply of homes on the market continues to fall and the limited availability is helping drive up prices. Over the year, median existing home prices are up over 9%. That gain was backed by another increase in the Federal Housing Finance Agency’s index. In October, the FHFA indicated that single-family home prices rose and over the year, they are up 5.6%. Since these are only conforming loans, it is not a surprise that they differ in magnitude. However, the trend is similar: The price increases are accelerating.

MARKETS AND FED POLICY IMPLICATIONS: Almost all the data released today were better than expected. Third quarter growth came in above 3%, creating a strong base for the current quarter. Housing sales and prices continue to rise and the dearth of supply should lead to even stronger price gains. That will only help the market and improve consumer confidence. The Philadelphia Federal Reserve Bank’s reading of manufacturing activity in the Mid Atlantic region jumped into positive territory as firms started shaking off the problems created by Sandy. The only negative was a drop in leading indicators but that should not surprise anyone as we know that corporations are preparing for the worst coming out of Washington. In other words, this economy is continuing to move forward despite every effort on the part of our elected “leaders” to prevent that from happening. This resilience is the key to any potential rebound next year. Leading the way will be housing but once corporate confidence returns, hiring and investment will follow.

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RE/MAX Connection Realtors is not a licensed financial advisor and is not providing any financial advice. You should consult with a licensed financial advisor prior to making any financial decisions. RE/MAX Connection Realtors only is 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 Lincoln Drive East, Suite Two, Marlton, NJ 08053 www.goconnectionnj.com

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A Message from Christopher J. Brown / November Housing Starts and Permits

A message from RE/MAX Connection CEO Christopher J. Brown:

As a small business owner and an elected public servant, I am calling on Congress to come together in the spirit of compromise, for the sake of our country’s economy, to get a deal in place to avoid the pending consequences of the fiscal cliff.

What we need is a combination of lower federal spending and higher revenue from moderate cuts in deductions and sensible tax increases for the highest-income earners. To make these cuts and increases more meaningful, though, we must take the revenues they produce and apply them toward reducing the federal budget deficit.

Middle-class families and entrepreneurial companies are the heart and soul and of our country’s economy. We cannot allow the detrimental effects of the fiscal cliff to rob families of disposable income and gut the operating budgets of small businesses. These are the economic engines that will grow our economy and we must not abandon them.

(NOTE: In addition to his role as RE/MAX Connection CEO, Christopher J. Brown also is a New Jersey state Assemblyman, serving portions of Burlington, Camden and Ocean counties.)

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Naroff Economic Advisors, Inc.

Joel L. Naroff
President and Chief Economist

INDICATOR: November Housing Starts and Permits

KEY DATA: Starts: -3%; 1-Family: -4.1%; Permits: +3.6%; 1-Family: -0.2%

IN A NUTSHELL: “The housing recovery continues as it is not unusual for construction activity to have some ups and downs.”

WHAT IT MEANS: The housing market is clearly on an upswing. The new construction activity decline in November was nothing to worry about. After an eighteen percent rise over the previous two months, it was hardly a surprise to see the level of starts moderate. Indeed, the October pace was the highest since July 2008. That the November decline was so small is a positive indication that construction activity continues unabated. Sandy slowed builders in the Northeast somewhat but it was a sharp cut back in the West that caused overall national housing starts to fall. Meanwhile, construction in the South and Midwest continued to increase. So far this year, housing starts are up over twenty seven percent compared to the same eleven month period in 2011. Importantly, the fourth quarter pace is thirteen percent above the third quarter rate and that means residential construction should add sharply to growth. Looking forward, housing permit requests continue to rise and the level supports some additional construction activity. Builders are not taking out permits and sitting on them as the number of units under construction is rising while the number authorized but not started has remained reasonably stable over the past few months.

MARKETS AND FED POLICY IMPLICATIONS: The expectation was that home construction would slow and it did. However, given how far and how fast building activity has accelerated over the past few months, the moderation was hardly a sign that housing market has hit a soft patch. There is really little reason to worry about the housing market especially given the continued rise in home builders’ attitudes. The National Association of Home Builders’ Confidence index rose for the eight consecutive month in December, to its highest level since April 2006. More construction also means that the sharp declines in construction payrolls that we saw in the November employment report should be reversed in December. The takeaway is that the housing market is indicating that the economy really is growing more strongly than is commonly believed. If households were really worried, they would not be buying new homes and developers would not be out there putting the shovels into the ground. As soon as we get an agreement on the fiscal cliff, watch for everyone to start saying the economy is ready to take off. Actually, lift off has already begun. The only problem has been Washington’s finger on the abort button. Once that is removed, we should be able to reach orbit.

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