|Quiet Now, But Questions Abound Commentary ~ May 19, 2014
Very little obvious change in this past week’s economic indicators. International currencies continued to move in close proximity with one another; interest rates barely budged; the most influential mortgage rates moved hardly at all (again); and the minimal changes to monthly retail sales data told us little.
The MBA figures for mortgage applications, though they didn’t move much from last week, nonetheless suggested that the greater number of applications we’ve seen over the past two weeks aren’t just an anomaly. We will watch to see if mortgage applications continue to rise-as they very well may, as suggested by the recent break in the downward drift.
All told, it’s another of those slightly weeks with slightly positive data and the requirement that we wait to see if any of the incipient optimism we may be beginning to feel will pan out in better home sale data. The next data for existing home sales will be released on May 22…for new home sales on May 23. It’s possible that we’ll have better figures than in the recent past, and that the possibility of an improving real estate market will shake up the overall investment markets. Pay close attention to what the Pending Home Sales Index suggests on May 29 about the strength of future existing home sales.
The PPI-FD: It may take all of us a while to adapt to a newly-organized Producer Price Index. Readers will recall that we’ve worked (and continue to work) with a CPI-Consumer Price Index-that measures changes in consumer prices at the retail level. We have also had a Producer Price Index, though we’ve paid it less attention, and it has tended to tell us the level of inflation at the wholesale level. What we now have is the PPI-FD Index, which combines a larger number of product categories (food, energy, goods, services, etc.), and provides what the producer price index gave us, except that it does so at the “FD” or “final delivery” level. (There are also “intermediate delivery” levels and perhaps we can all soon understand these changes.)
FINAL NOTE: Since becoming director of the Federal Housing Finance Agency in January, Mel Watt hasn’t made specific comments about his plan to support the housing recovery. Until now. He recently said he will reverse a plan to reduce the size of Freddie Mac and Fannie Mae loans. He will also maintain the size of government support for multi-housing loans and, very importantly, will reduce the likelihood that lenders will have to repay the mortgages they write with government backing. Lenders are generally happy with these promises, saying they bode well for the health of the lending industry.