November Pending Home Sales/Weekly Unemployment Claims

NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist

INDICATOR: November Pending Home Sales/Weekly Unemployment Claims
KEY DATA: Pending Sales: +7.3%/Weekly Claims: 381,000 (up 15,000)
IN A NUTSHELL: “Most housing reports are looking up but prices are still in the dumps.”

WHAT IT MEANS: It is hard to get really strong growth if home construction remains weak, so any good news about that sector should be trumpeted. So here is today’s blast: Housing sales are beginning to climb. The National Association of Realtors reported that pending home sales, which are contract signings, jumped in November to the highest level since April 2010. Since that was when the government’s “first time, long time” buyers’ incentives were in place, it looks like we are now in the midst of a real, not policy-hyped recovery. Improvement was seen in all regions with the West and Northeast leading the way.
In a separate report, unemployment claims jumped last week. That was expected though the rise was somewhat more that predicted. Still, the trend is down as the four week moving average fell fairly sharply. It is now at a level that tends to signal declining unemployment rates.

MARKETS AND FED POLICY IMPLICATIONS: Most housing data have been coming in better than expected and that is an indication that the log jam is beginning to break. The jump in pending home sales should lead to a further rise in sales over the next few months. With affordability at a record high, if we can only make it a little easier to get a mortgage we just might see the sector show some real strength. Unfortunately, the huge number of distressed houses overhanging the market will continue to put downward pressure on prices and limit the uptick in home construction. Still, this report adds to the belief that the weakest link in the economy, housing, is starting to come out of it.

Next week is a big one as we get the December jobs report on Friday. While the rise in the claims number is a warning that the labor market is still not strong, there are real hopes the payroll numbers will be quite solid. The bigger question is the unemployment rate, which gapped down in November. A modest rise, which is expected, would be a positive sign that conditions are firming and that seems to be the message coming from the claims numbers. So we are ending the year on an up note and I want to wish everyone a

HAPPY NEW YEAR
RE/MAX Connection Realtors disclaimer:
RE/MAX Connection Realtors are not licensed financial advisors, and are not providing any financial advice, 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.
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September Retail Sales

NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist

INDICATOR: September Retail Sales
KEY DATA: Sales: +1.1%; Excluding Vehicles: +0.6%

IN A NUTSHELL: “Recession, how can you say we are in recession when consumers keep spending?”

WHAT IT MEANS: We all know that consumers have stopped buying, right? Wrong. At least if you believe the Census Bureau. Retail sales soared in September helped along by a rebound in vehicle demand. But it wasn’t just vehicles as only supermarkets, garden supplies and sporting goods stores posted declines. There were large increases in sales of gasoline, despite a drop in prices, clothing, furniture, general merchandise and at restaurants. It was interesting that people ate out a lot more since this is a sector that tends to mirror optimism. Maybe people are not as distressed as the surveys seem to indicate. During the third quarter, retail sales rose at a robust 4.5% annualized pace and even adjusting for inflation, it looks like consumer demand was up solidly.

MARKETS AND FED POLICY IMPLICATIONS: This was a strong report in a line of releases that seem to refute the notion that a double dip is here or inevitable. The economy is not in great shape but it is hardly falling apart, a theme I have been harping on for quite some time. Unfortunately, we are in a slow, steady, grinding recovery that is not creating lots of jobs and that intense focus on employment is hiding the process. Yes, it would be nice to flip a switch and have economic and job growth start to soar but with housing, finance and fiscal policy acting as restraints, that is not realistic. In the face of those uncertainties, though, consumers are persevering and third quarter consumption should be strong enough that growth in excess of 3% is likely. Indeed, a solid increase in services spending, which is not part of the retail sales report, could send the number closer to 4%. Though not sustainable, that level of growth would put pressure on businesses to start hiring again. We had started switching gears early this year but the high price of gasoline cut the legs from under the recovery. Gasoline prices are down and should come down a lot more. That will add to spendable income and keep the upturn going. Investors are likely to eat up this report since it is a lot higher than expected. For a little while at least, the focus will be back on the U.S. economy rather than European sovereign debt.
RE/MAX Connection Realtors disclaimer:
RE/MAX Connection Realtors are not licensed financial advisors, and are not providing any financial advice, 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

July Consumer Price Index

NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist

INDICATOR: July Consumer Price Index
KEY DATA: CPI: +0.5%; Excluding Food and Energy: +0.2%

IN A NUTSHELL: “There is no rest for the consumer as prices are rising for a wide variety of goods and services.”

WHAT IT MEANS: Once again, the consumer was pushed to the wall by rising retail costs. The Consumer Price Index jumped in July and the increases were pretty much across the board. Gasoline was a major component of the gain but that is unwinding big-time in August. However, food costs just keep increasing. Over the year, food expenses are up in excess of 4% and that is not making the weekly trip to the supermarket very pleasant. Housing rose moderately but we are beginning to see the impact of rent increases. Educational establishments remain in their own world as tuition continues to skyrocket. I cannot wait until my son finally graduates, even if he winds up moving back home. But the strangest situation is in clothing. There was a third consecutive 1% or more monthly increase and over the past three months prices have surged at a 16.4% annualized rate. Apparel has been a moderating influence on overall inflation for years and if we are entering a period of rising prices inflation will be elevated for quite some time. We did see the usual declines in communications and computers while medical care expenses continue to rise at a surprisingly moderate pace.

MARKETS AND FED POLICY IMPLICATIONS: The rise in consumer costs is distressing. It’s bad enough that workers are not getting any pay increases but the surge in retail prices is cutting into spendable income. Inflation-adjusted weekly earnings fell in July and are down by 1% over the year. That is one big reason that consumption is so sluggish. The choice is to spend less or save less and in these uncertain times we know which direction households are going. As for the Fed, the core index, which removes food and energy, is nearing the upper bound of its desired range and is likely to be breached in the fall. Worse, the situation with food is not transitory. There is little reason to think food costs will ease sharply and in the long run as millions of people move into the middle class in the developing nations, the outlook for food is for higher than average inflation. The Fed should keep food in its core index and only exclude energy. The Fed’s bet on low inflation looks like a loser even if the top line number comes way down over the next few months due to the falling energy costs. Core prices are on the rise. But Mr. Bernanke has wedded himself to a two year process so inflation over the next few months is not likely to have any impact on Fed policy. In the long run, though, we are likely to be in for a bought of higher than desired inflation, something the inflation hawks will be chirping about and rightfully so. As for investors, right now it’s all about Europe though and report cannot ease any fears.

RE/MAX Connection Realtors disclaimer:
RE/MAX Connection Realtors are not licensed financial advisors, and are not providing any financial advice, 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

June Consumer Spending and Income

NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist

INDICATOR: June Consumer Spending and Income
KEY DATA: Consumption: -0.2%; Disposable Income: +0.1%

IN A NUTSHELL: “With gasoline prices high, incomes not growing and the craziness in Washington creating uncertainty, is it any surprise that people stopped spending?”

WHAT IT MEANS: If the recovery is ever going to gain speed, it will have to come from households deciding they want to spend money again. That will trigger the spending of the $2 trillion sitting on the books of businesses. Well, in June households didn’t hit the malls or vehicle dealers very hard at all. Consumer spending slowed, especially for big-ticket items. There was some increase in soft good items but nothing to write home about. Meanwhile, the services segment, which is nearly two-thirds of all spending, continues to go nowhere. This part of the economy normally grows solidly and consistently and the failure to do so is a clear sign that people are still extremely cautious. Of course, to be able to spend a lot of money you need to make a lot of money and income growth is extremely weak. Wage and salary income was actually down in June. As for inflation, the declining gasoline prices led to a drop in costs.

MARKETS AND FED POLICY IMPLICATIONS: It’s tough to say anything positive about a report that points to consumers spending less money and wage and salary income falling. The spring data have been pretty distressing but we already know that given the weak GDP report. The question, as usual, is where we go from here. What worries me is that businesses are deriving their strong earnings growth through productivity gains, limited wage increases and foreign activities. While that may be good for an individual firm, when most companies do that, income gains become so limited that spending and ultimately growth fades. That is the problem we are now facing. Firms are generating robust earnings but Wall Street is delinked from Main Street and those profits are not creating lots of jobs. Until that changes, there is little reason to expect a strong rebound in growth, especially given the brakes being applied by the weak housing market and the cautious financial sector. At least the debt ceiling bill didn’t cut too much spending in the short term. If there were large spending reductions and/or tax increases, the outlook for growth would be even dimmer than it is currently. Indeed, while almost no economists are marking their short-term forecasts up, the downgrades are minimal. Which raises the question I am hearing a lot today: If a budget agreement was needed to improve growth, why aren’t people more optimistic about growth now that we have an agreement?

RE/MAX Connection Realtors disclaimer:
RE/MAX Connection Realtors are not licensed financial advisors, and are not providing any financial advice, 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

April Retail Sales

NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist

INDICATOR: April Retail Sales
KEY DATA: Sales: +0.5%; Excluding Gasoline: +0.2%; Excluding Gasoline and Food: 0.0%

IN A NUTSHELL: “Money is flowing out of consumers’ pockets but an awful lot is being pumped into gasoline tanks.”

WHAT IT MEANS: The economy continues to grow but the overriding question is: “How will the surge in gasoline prices affect the sales of other goods?” We got some insight into that with the April retail sales numbers and the initial returns are not great. While overall demand rose solidly, over sixty percent of the rise came from the increase in gasoline purchases. The other source of pain for consumers, food costs, also played a role with purchases increasing sharply as well. Indeed, when you exclude food and gasoline sales, where the rise was largely price driven, total retail sales were largely flat. People did buy more vehicles, which we knew from the unit sales numbers. Clothing and general merchandise stores did okay but the only winner was online companies. In contrast, furniture, electronics and appliances, sporting goods, restaurants and health care products were all off. The best news was an upward revision to the March numbers which could offset some of the negative from the wider trade deficit.

MARKETS AND FED POLICY IMPLICATIONS: This was a disappointing but not surprising report. Wage and salary income is not growing strongly so for most people, the higher gas prices are a constraint on their budget. But the commodity bubble (yes traders, it was a bubble and there was speculation) has at least started to deflate if not burst so going forward, we should see lower gasoline prices. The issues being created by the Mississippi flooding should only be short term. Look for the negative effects of the oil price spike to be unwound as we move through June (prices go up quickly but for some strange reason they fall more slowly). Thus, second quarter consumption should be soft but it could rebound sharply in the summer. If that sounds like a rationalization for my robust second half of the year forecast, so be it. But I am sticking to that forecast. This report has so much noise due to gasoline that I doubt the Fed will think much about it. But traders may get a bit concerned. What troubles me is that while gasoline prices may fall, food costs continue to rise as we saw in today’s wholesale price data. That could keep spending from really breaking loose. Nevertheless, retail sales should improve during the second half of the year.

RE/MAX Connection Realtors disclaimer:
RE/MAX Connection Realtors are not licensed financial advisors, and are not providing any financial advice, 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

February Income and Consumption

NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist

INDICATOR: February Income and Consumption
KEY DATA: Consumption: +0.7%; Disposable Personal Income: +0.3%; Prices: +0.4%

IN A NUTSHELL: “Consumers opened their wallets up but they also had to pay a lot more for their purchases.”

WHAT IT MEANS: Households seemed to be willing to brave the cold and snow and generally bad weather in February to visit their local malls. Spending rose solidly as people bought lots of soft goods and big-ticket items. They are still being cautious on buying services as those are goods they can easily do without. But while the consumption numbers look real strong, a lot of the money coming out of households’ pockets went to pay for rising prices. The Fed’s key inflation indicator jumped and even excluding food and energy it was up at a pace that if continued, would not make the FOMC members happy. Adjusting for inflation, spending was decent but not spectacular. Can consumers pay for all those goods? Well, maybe. Disposable personal income, which adjusts for taxes, rose at a somewhat disappointing pace. Wages and salaries increases were limited and while that may help corporate earnings, it doesn’t do much for spending power. What is of real concern is that incomes rose less than prices. Thus, household spending power actually declined. That does not bode well for economic growth if it keeps up. Indeed, so far this quarter, consumption is growing at a modest pace and it looks like first quarter growth could be as weak as I have feared. The savings rate was just below 6%, a rate similar to what we have seen for the last two years.

MARKETS AND FED POLICY IMPLICATIONS: There is a concept in economics called the “fallacy of composition”. Basically, it says that what is good for an individual may not be good for the whole. If a business restrains wage growth, that will help its profitability. However, if all companies do the same, then income gains are limited. As a consequence, demand grows slowly and so do profits. Much of the strong earnings we have seen coming from large companies is due to international activities so don’t assume that the increases in the equity markets imply strong domestic growth. Main Street and Wall Street are largely disconnected right now. While rising wealth does help, ultimately for this economy to grow strongly we need better income growth. Whether that comes from more hiring or higher wages or a combination of the two, it needs to happen. For the Fed members, this was an uncomfortable report. Spending power is declining as inflation is rising. With growth still disappointing, there is little the Fed can do in that scenario, i.e., it cannot raise rates so slow inflation or add more liquidity to raise growth. As for investors, inflation is not yet a major problem. But it is moving upward so it should not be viewed as being tame, no matter the Fed Chairman may publicly claim.
RE/MAX Connection Realtors disclaimer:
RE/MAX Connection Realtors are not licensed financial advisors, and are not providing any financial advice, 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 Housing Starts and Permits

NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist

INDICATOR: January Housing Starts and Permits
KEY DATA: Starts: +14.6%; 1-Family: -1.0%; Permits: -10.4%; 1-Family: -4.8%

IN A NUTSHELL: “If you can’t buy a house you have to rent so builders may now be putting up apartments instead.”

WHAT IT MEANS: With housing finally starting to add to rather than subtract from economic growth, it would be nice if we saw signs that it would continue. That just might be the case. New housing starts soared in January, which is good news. However, all the gain was in multi-family construction as single-family activity eased back. The stand alone home weakness is not a surprise given the massive excesses of the last decade, coupled with tight credit standards and the overhang of foreclosures. Those factors will continue to keep single-family building to a minimum. What is nice to see is that developers seem to be picking up the slack by putting up rental and condo units instead, a trend that is likely to continue. While permits fell sharply, they were artificially bloated in December by regulatory changes in some states. That they still were above the levels posted in the fall seems to point to a steady improvement in residential construction. Builders are keeping supply under control as homes under construction were flat. On a regional basis, the only “weak” area was the West. However, the level was still quite decent and it was down because of a December’s 40% jump. These data are volatile so some reduction after such a large increase is not anything to be worried about.

MARKETS AND FED POLICY IMPLICATIONS: Housing is the beast that devoured the economy and it is one of the missing links that is causing the recovery to be so sluggish. If there any hope for housing construction it is not in homeownership but in rentals. That trend is happening to some extent as investors are turning the distressed houses in rental units. The surge in multi-family activity, which really started in the second half of last year, is an indication that builders may be looking toward the rental portion of the market, not just condos, as the way to stay in business. That said, it is always dangerous to make any assumptions about construction based on winter data. Given the seasonal adjustment factors, it doesn’t take a lot of new activity to create large percentage swings in activity. So think of the rise in multi-family construction as a possible beginning of a trend but don’t assume it is written in stone. Regardless, this report is neither fish nor fowl for investors and with wholesale prices soaring, the markets will likely focus more on inflation than housing. The Fed member may also have to do some soul searching about where inflation may be heading.

RE/MAX Connection Realtors are not licensed financial advisiors, and are not providing any financial advise, you should consult with a licensed financial advisior 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

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.

December Conference Board’s Consumer Confidence Index

NAROFF ECONOMIC ADVISORS, Inc.

Joel L. Naroff

President and Chief Economist

 

INDICATOR: December Conference Board’s Consumer Confidence Index

KEY DATA: Confidence:  52.5 (down 1.8 points); Present Situation: 23.5 (down 1.9 points); Expectations: 71.9 (down 1.4 points)

IN A NUTSHELL:   “People are saying they are still worried but acting differently as they have hit the malls pretty hard.”  

WHAT IT MEANS:  The sluggish recovery is the result of consumers holding tightly to their hard earned dollars.  All the reports seem to indicate they have begun to blow the dust out of their wallets and are spending more.  Strangely, though, that attitude has yet to translate into rising consumer confidence.  The Conference Board’s December reading of household perceptions was down, surprisingly.  People are less confident about the current economy and future opportunities.  They are still quite worried about where the labor market is going and that is not good news because a smaller percentage of the respondents think their incomes will rise next year. Jobs are still issue number one and as long as the labor market remains less than stellar, workers will be concerned about their job securityAn additional reason for the continued uncertainty is the housing market.  The S&P/Case-Shiller October numbers came out today and they were disappointing.  Prices fell everywhere and eighteen of the twenty large metropolitan areas had a deceleration in their price gains.  Indeed, for the first time since January, the twenty-city index was down on a year-over-year basis.  Foreclosures continue to pressure the market and that is not going to change anytime soon.  With some much of their wealth tied up in housing, home price declines can only hurt perceptions of the world.  Stability would be nice but we have to stop falling before we can start rising and I am not sure there are lots of places across the nation where housing price increases are being recorded. 

MARKETS AND FED POLICY IMPLICATIONS: The data today were disappointing.  Declining housing prices only feed the uncertain beast that is the consumer.  But we also have had news that the holiday shopping season was quite good.  So, should we listen to what consumers’ say or watch what they do?   To me, the proof is in the doing and I am not so certain we should take too much away from the decline in the confidence index.  If that is repeated in January, yes, it might be time to redo the forecast.  But I have been marking my numbers up recently and for good reason: Most of the other data have been solid!  Unfortunately for investors, there is not a whole lot of important data coming out the rest of the week so they will have to make end of the year judgments on these numbers.  I suspect traders will probably close up shop and watch and wait until next week.

November Existing Home Sales

NAROFF ECONOMIC ADVISORS, Inc.

Joel L. Naroff

President and Chief Economist

 

INDICATOR: November Existing Home Sales

KEY DATA: Sales: +5.6%; 1-Family: +6.7%; Condos: -1.9%  

IN A NUTSHELL:   “The housing markets upward climb from the depths of depression is continuing.”  

WHAT IT MEANS:   The housing market is coming back!  Okay, that is saying way too much about a sector that is still hurting.  Nevertheless, the direction is up and that is good.  Existing home sales rose in November, according to the National Association of Realtors.  Yes, I know, the sales pace remains pathetic but everything is relative.  Since hitting rock bottom in July, a consequence of the government’s home buyers’ credits disappearing, demand has steadily improved.  Most of the gain came in the single-family portion of the market.  Condo and coop purchases have improved modestly.  Looking across the nation, while every region posted an increase, the Midwest and West shined the most.  As for prices, they firmed but mostly in the Northeast.  With inventory declining, we could see prices rise slowly going forward. 

MARKETS AND FED POLICY IMPLICATIONS: Yes, Virginia, there is a housing market.  No, it is not a robust, economy leader but it is turning around.  Housing starts seem to be edging upward and now we see that existing home sales are on a clear improving trend.  Mortgage rates are still quite low even with the recent pop and that rise will likely hurt refinancings more than new purchases.  That, indeed, is what the Mortgage Bankers Association weekly applications data seem to be indicating.  The rates remain great on an historical basis and should hot stop too many sales.  The problem is more with equity and credit availability.  With prices so low and appraisals using many fire sale comparables, it is hard to get much money from a home.   Lacking equity, it’s tough to move and without people trading up or down, demand is limited.  That not only hurts the housing market but also affects labor mobility.  While another housing bubble would not be a good idea, some decent increases in home prices would be a great help.  Despite the depressed levels, investors should look at this report as a sign that housing could add somewhat to growth going forward.  As for the Fed, the members have hung their bond purchases on the economy with care, hoping a robust recovery will soon appear.  They will likely get that upturn, but not because of QE2.