March 1st, 2012 10:37 AM by Mel Samick
It appears that the warmer than normal temperatures around the country helped keep home sales on the rise. Home Sales were up 4.3 percent in January and inventories were at a 7 year low. December's sales were revised downward. Instead of a 5% gain, as was initially reported, sales actually were down .5 percent. First-time home buyers accounted for 33 percent of all sales and distressed sales accounted for 35 percent of all transactions. Median Sales Prices declined by 2 percent to $154,700. FHFA reports that Home Prices increased .7 percent in December. New House Sales slipped a little in January, but that was due mainly to the December numbers being revised higher. New Home Sales were 321,000 in January compared to 324,000 in December.
Another driver of home sales is employment. The statistics keep pointing to a recovering job market. Jobless claims remained unchanged for the week; however, the four week average fell by 7,000 to 359,000. That is the lowest level since March 2008. Continuing claims fell by 52,000 for the week ending February 11th with 7.5 million people receiving either state or federal unemployment benefits.
The political strife with Iran is causing oil prices to spike. On Friday, oil was trading above $109 a barrel. Even though it seems unlikely that Iran can cause any kind of sustainable disruption in world oil supplies, investors are trading on that fear. The increase in oil prices could also cause problems for the Fed and other world Central Banks as they are trying to sustain growth and keep inflation low.
The EU is also worried about the proposal for the Volcker Rule that U.S. bank regulators introduced. The proposal would prohibit big, insured banks from proprietary trading i.e. trading stocks and derivatives with their own money. One of the provisions state that trading of U.S. securities would be allowed while trading in non-U.S. sovereign debt would be prohibited. The regulators outside the U.S. fear the effect the rule would have non-U.S. foreign capital markets.
The Dow closed the week at 12,982 after crossing the 13,000 barrier several times. As energy prices continue to climb further, consumer spending will likely see a decline. Any company that relies on discretionary income spending will likely take a hit. U.S. Futures slipped Monday morning as G20 leaders did not agree to increasing funding for the International Monetary Fund.
The week ahead is a busy one. We start Monday with the Pending Home Sales Index. On Tuesday, Durable Goods Orders, Case-Shiller Home Prices, and Consumer Confidence will be reported. Wednesday will feature the GDP and the Chicago PMI. Thursday will be the busiest day with Jobless Claims, Personal Incomes, Consumer Spending, Core PCE Price Index, Construction Spending, and Motor Vehicle Sales releases.
Information provided by NYCB Capital Markets