INFO THAT HITS US WHERE WE LIVE!!

INFO THAT HITS US WHERE WE LIVE... Confirming the insight of the Hibernian bard, the housing market happily kept growing in December. Existing Homes Sales went up 1.0%, to a 4.87 million annual rate. For all of 2013, 5.09 million existing homes were sold, up 8.9% from 2012, and the best annual sales level since 2006. Yes, existing home sales have slowed over the past few months, but this situation is not expected to last. Analysts observe that a lack of inventory has been leading some potential existing home buyers to purchase new homes instead. Existing home inventories, in fact, dropped 9.3% in December, close to all-time lows. 

Observers see more homes coming onto the market this year, as prices move higher. Right now, existing home median prices are up 9.9% versus a year ago, to $198,000. Average prices are up 8.6% over last year. The FHFA index of prices for homes financed with conforming mortgages went up 0.1% in November. This was the smallest hike in 16 months, but the index is up 7.6% over a year ago. Economists expect home prices to keep edging up, though not as much as last year. They feel that as home builders ramp up, the additional supply will slow the rate of price gains compared to last year.

BUSINESS TIP OF THE WEEK... Don't get caught up responding to crises. Instead, have a plan for proactively tackling projects each day. Commit time for every task, then set aside an extra block for unexpected events.

>> Review of Last Week

DOWN DOWN DOWN DOWN... Those four words perfectly describe the four days of the Dow's performance during a trading week shortened by Monday's Martin Luther King Jr. Day holiday. Both the Dow and the S&P 500 suffered their worst weekly losses in more than a year. The tech-y Nasdaq fared better but still lost ground for the week. Some observers explained all the downward motion as merely the start of a stock market correction, following the record setting performances we saw last year. Others felt it reflected continuing economic concerns.

Those worries began with China, thanks to our interconnected global economy. The HSBC Flash PMI reading indicated Chinese manufacturing contracted slightly in January, plus there were concerns over the health of the Chinese shadow banking system. Over here, Existing Home Sales and Leading Economic Indicators were each up slightly, but less than expected. Although weekly jobless claims were up by 1,000, the four-week moving average dropped again from the previous reading, which is definitely a positive.

The week ended with the Dow down 3.5%, to 15879; the S&P 500 down 2.6%, to 1790; and the Nasdaq down 1.7%, to 4128.

Tumbling stocks sent bond prices skyward, with Treasuries in particular registering solid gains. The FNMA 3.5% bond we watch ended the week up .86, to $101.06. In Freddie Mac's Primary Mortgage Market Survey for the week ending January 23, national average fixed mortgage rates drifted a tick lower for the second week in a row. "Reports that inflation remains subdued" were given as the reason for the decline. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information.

DID YOU KNOW?... The latest Fed Beige Book reported that most Federal Reserve districts witnessed increased residential sales activity, construction, and home prices from late November to the end of 2013.

>> This Week’s Forecast

NEW AND PENDING HOME SALES, GDP, MIDWEST MANUFACTURING SLIP, THE FED MEETS... December New Home Sales and Pending Home Sales should be off a bit, as well as overall economic growth in Q4, according to the GDP – Advanced reading. The important Chicago PMI is forecast to show a slower rate of expansion for manufacturing in the Midwest. Wednesday's FOMC Meeting will tell us how the Fed will taper their bond buying program, although the Funds Rate isn't expected to budge.

Other notable reports include Personal Spending, which is predicted to slow a little in December. But Core PCE Prices should show inflation is still under control.

>> 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 Jan 27 – Jan 31

Date	Time (ET)	Release	For	Consensus	Prior	Impact
M Jan 27	10:00	New Home Sales	Dec	457K	464K	Moderate
Tu Jan 28	08:30	Durable Goods Orders	Dec	2.1%	3.4%	Moderate
Tu Jan 28	10:00	Consumer Confidence	Jan	77.5	78.1	Moderate
W Jan 29	10:30	Crude Inventories	1/25	NA	0.990M	Moderate
W Jan 29	14:00	FOMC Rate Decision	Jan	0%–0.25%	0%–0.25%	HIGH
Th Jan 30	08:30	Initial Unemployment Claims	1/25	325K	326K	Moderate
Th Jan 30	08:30	Continuing Unemployment Claims	1/18	3.000M	3.056M	Moderate
Th Jan 30	08:30	GDP – Advanced	Q4	3.0%	4.1%	Moderate
Th Jan 30	10:00	Pending Home Sales	Dec	–0.2%	0.2%	Moderate
F Jan 31	08:30	Personal Income	Dec	0.2%	0.2%	Moderate
F Jan 31	08:30	Personal Spending	Dec	0.2%	0.5%	HIGH
F Jan 31	08:30	PCE Prices - Core	Dec	0.1%	0.1%	HIGH
F Jan 31	08:30	Employment Cost Index	Q4	0.4%	0.4%	HIGH
F Jan 31	09:45	Chicago PMI	Jan	58.0	60.8	HIGH
F Jan 31	09:55	U. of Michigan Consumer Sentiment – Final	Jan	80.4	80.4	Moderate

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months... The focus of this week's FOMC meeting will be on what the Fed will do about tapering its bond buying program. Economists do not expect the super low Funds Rate to budge. 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
Jan 29	0%–0.25%
Mar 19	0%–0.25%
Apr 30	0%–0.25%

Probability of change from current policy:

After FOMC meeting on:	Consensus
Jan 29	<1 span="">
Mar 19	<1 span="">
Apr 30	<1 span="">