Inside Lending Newsletter - For the week of February 27, 2012 – Vol. 10, Issue 9

>> Market Update  QUOTE OF THE WEEK..."What is past is prologue." --William Shakespeare INFO THAT HITS US WHERE WE LIVE... January New Home Sales dipped slightly, but only because the past month's sales were revised higher. Together, December and January new home sales were the best they've been in a year, up 3.5% in that time frame. The median sale price squeaked up $1,000 for the month, to $217,500. Best of all, the supply of new homes dropped to 5.6 months, the lowest in six years, with a record low 151,000 new homes for sale. Earlier in the week, January Existing Home Sales came in up 4.3%, but only because the past month's were revised lower. However, this was the third gain in four months and the best level since May 2010. Sales were up in all regions, and the supply of unsold homes dropped to a new post-recession low of 6.1 months. Existing home sales in 2011 were up 1.7% over 2010. The FHFA index of prices for homes with conforming mortgages, was up 0.7% in December and up 1.8% since March, the biggest 9-month gain since 2005-2006. BUSINESS TIP OF THE WEEK...  Business is a network of interconnections. Work the network with ideas and proposals that trigger actions from colleagues, suppliers and clients to help you reach your goals. >> Review of Last Week UNLUCKY OVER 13,000... The Dow made several trips over 13,000, but wasn't lucky enough to ever end a trading day above that number, something it hasn't done since May 2008. Still, all three major indexes enjoyed gains for the holiday-shortened week, with the S&P 500 racking up its seventh advance in eight weeks. However, investors remain concerned about the slow pace of our economic recovery and the continuing financial uncertainty in Europe.  The housing numbers reported above were good news, as it appears the market is starting to heal. The jobs situation needs to be a whole lot better, but at least it's not getting worse, with weekly new jobless claims unchanged at 351,000. Continuing unemployment claims dipped to 3.39 million, their lowest since August 2008. And people seem to be feeling more positive, as Friday, the University of Michigan Consumer Sentiment index climbed to its highest level in a year. For the week, the Dow ended up 0.3%, at 12983; the S&P 500 closed UP 0.3%, at 1366; and the Nasdaq shot up 0.4%, to 2964. Bond prices dipped early in the week, with investors heading back to stocks after a new Greek rescue package was agreed to. But lingering concerns over Europe restored some gains. The FNMA 3.5% bond we watch ended the week up .03, to $103.13. National average mortgage rates edged up slightly for fixed-rate loans, but still remain near the lowest levels on record, according to Freddie Mac's weekly survey. DID YOU KNOW?... A recent National Association of Realtors survey reported that 34% of home transactions had cash down payments at or above 20% of the sale price. >> This Week’s Forecast PENDING HOME SALES, Q4 GDP, INFLATION...  It will be interesting to see today's January Pending Home Sales number, expected up a bit, given the slide we saw last month. Wednesday's Q4 GDP - Second Estimate should match the initial number. Inflation comes Thursday, with the Fed's favorite measure of Core PCE Prices forecast to stay within the central bank's guidelines.  Manufacturing growth should hold steady as reported by the Chicago PMI for that area and by the ISM Index for the whole country. The Fed's Beige Book will give us a region-by-region view of the state of the recovery. >> 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 Feb 27 – Mar 2  Date Time (ET) Release For Consensus Prior Impact M Feb 27 10:00 Pending Home Sales Jan 1.0% -3.5% Moderate Tu Feb 28 08:30 Durable Goods Orders Jan -1.4% 3.0% Moderate Tu Feb 28 10:00 Consumer Confidence Feb 62.5 61.1 Moderate W Feb 29 08:30 GDP - 2nd Estimate Q4 2.8% 2.8% Moderate W Feb 29 08:30 GDP Deflator - 2nd Est. Q4 0.4% 0.4% Moderate W Feb 29 09:45 Chicago PMI Feb 60.0 60.2 HIGH W Feb 29 10:30 Crude Inventories 2/25 NA 1.633M Moderate W Feb 29 14:00 Fed's Beige Book Feb NA NA Moderate Th Mar 1 08:30 Initial Unemployment Claims 2/25 355K 351K Moderate Th Mar 1 08:30 Continuing Unemployment Claims 2/25 3.425M 3.392M Moderate Th Mar 1 08:30 Personal Income Jan 0.4% 0.5% Moderate Th Mar 1 08:30 Personal Spending Jan 0.3% 0.0% HIGH Th Mar 1 08:30 PCE Prices - Core Jan 0.2% 0.2% HIGH Th Mar 1 10:00 ISM Index Feb 54.5 54.1 HIGH >> Federal Reserve Watch    Forecasting Federal Reserve policy changes in coming months... The Fed has made it clear they won't raise the Funds Rate before the end of 2014 unless they see higher inflation or a stronger recovery. Neither is happening yet. 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 Mar 13 0%–0.25% Apr 25 0%–0.25% Jun 20 0%–0.25% Probability of change from current policy: After FOMC meeting on: Consensus Mar 13      <1% Apr 25      <1% Jun 20      <1%

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