Inside Lending Newsletter - For the week of March 19, 2012 – Vol. 10, Issue 12

>> Market Update  QUOTE OF THE WEEK..."I was taught that the way of progress was neither swift nor easy." --Marie Curie INFO THAT HITS US WHERE WE LIVE... The Polish physicist and chemist, famous for her pioneering work on radioactivity, could have been describing the U.S. housing market. But we are making progress. Realtor.com reported that the U.S. median list price of homes they track was almost 7% higher in February than a year ago. The web site of the National Association of Realtors (NAR) also reported that the inventory of U.S. for-sale housing is 22% lower than a year ago. Additional progress was seen in the median age of inventory of homes on the site dropping almost 10%, year over year. Realtor.com summarized the situation this way: "The nation's housing markets as a whole are in better shape today than at any time since the 2009-2010 tax credits." But it should be noted that although current inventory levels are near a two-year low, they're likely to grow a bit during the spring selling season. BUSINESS TIP OF THE WEEK... Rules (as opposed to laws) aren't there to control us, but to guide us. If you need a creative solution, you may have to break the rules. But that can be profitable, and it's always fun! >> Review of Last Week NEW HEIGHTS... The stock market enjoyed its fifth straight weekly gain, and its tenth in 11 tries. The broadly based S&P 500 is now up more than 11% for the year, as it ended the week above 1400 for the first time since mid-2008. Investors were feeling more hopeful in spite of the painfully slow U.S. economic recovery, worries over global economic growth rates and the still precarious European debt situation. Our economic indicators remain mixed. Excluding autos, retail sales were up 0.9% in February versus a 1.1% hike in January. Initial weekly jobless claims were down 14,000, to 351,000, a slight improvement in the labor market. Inflation is still worrisome, with consumer prices UP 0.4% in February, although "core" prices, excluding food and energy, were up just 0.1%. Empire Manufacturing hit its highest level in over a year and Philadelphia Fed Manufacturing reached a multi-month high, but overall industrial production was flat. Finally, University of Michigan Consumer Sentiment slipped from the prior month's one-year high. For the week, the Dow ended up 2.4%, at 13233; the S&P 500 also closed UP 2.4%, to 1404; and the Nasdaq went UP 2.2%, to 3055.  With signs the economy is improving, albeit at a snail's pace, money flooded back into riskier stocks, sending bond prices lower. The FNMA 3.5% bond we watch ended the week down .95, at $102.13. In Freddie Mac's weekly survey, national average mortgage rates edged up slightly from their record lows. Demand for purchase loans, according to the Mortgage Bankers Association, was up for the week and is now almost 12% above the level of a month ago. DID YOU KNOW?... The index of leading economic indicators (LEI) predicts future economic activity by looking at 11 indicators, including initial unemployment claims, new orders for consumer goods, building permits and S&P 500 stock prices.  >> This Week’s Forecast FOCUS ON FEBRUARY HOUSING... This week reveals a pretty complete picture of the February housing market. Tuesday, Housing Starts and Building Permits are expected to edge up a little, a good thing, but no breakthrough yet in builder confidence. Wednesday, Existing Home Sales should creep closer to the 5 million annual rate. Friday, New Home Sales are forecast to remain at January's annual rate. There are no dramatic changes forecast for Initial and Continuing Unemployment Claims. The Leading Economic Indicators Index should move up a bit. >> 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 Mar 19 – Mar 23  Date Time (ET) Release For Consensus Prior Impact Tu Mar 20 08:30 Housing Starts Feb 705K 699K Moderate Tu Mar 20 08:30 Building Permits Feb 695K 676K Moderate W Mar 21 10:00 Existing Home Sales Feb 4.61M 4.57M Moderate W Mar 21 10:30 Crude Inventories 03/17 NA 1.750M Moderate Th Mar 22 08:30 Initial Unemployment Claims 03/17 355K 351K Moderate Th Mar 22 08:30 Continuing Unemployment Claims 03/10 3.363M 3.343M Moderate Th Mar 22 10:00 Leading Economic Indicators (LEI)  Feb 0.6% 0.4% Moderate F Mar 23 10:00 New Home Sales Feb 321K 321K Moderate >> Federal Reserve Watch    Forecasting Federal Reserve policy changes in coming months... The Fed kept the Funds Rate right where it's been at last week's FOMC meeting. And it's expected to stay there a while longer. 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 Apr 25 0%–0.25% Jun 20 0%–0.25% Jul 31 0%–0.25% Probability of change from current policy: After FOMC meeting on: Consensus Apr 25      <1% Jun 20      <1% Jul 31      <1%

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