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| WEEKLY UPDATE | |
| A Newsletter to keep you in the know |
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| Volume 1 Number Four | Nov, 2000 |
| INSIDE THIS EDITION Good News || 30-year T-bond || Price of gold |
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 Closed sales of existing homes, according to the National Association of Realtors, were down by 3.9% in October–and this time we don’t have the usual caveat that sales remained strong in the West. According to NAR’s data, the west posted rather weak figures in October. California, though, held its own (barely). The sales pace increased by a mere 0.3% in October. In other words, it has leveled. (The other figure to pay attention to is the 3.2% decline in the number of sales in October, relative to the prior month. The 0.3% increase is year-over-year.) At the same time, however, the median selling price of an existing home in the state rose by 17%. This was a 2.1% increase over prior month’s median selling price. "The slow decline in existing home sales reflects the economic slowdown," writes Dan Green in The Dismal Scientist (dismal.com), offering up the consensus view of the slowed growth in real estate sales. We all understand that, even slowed or leveled, today’s real estate sales volume remains very strong on a historical basis. But a slowing is at last becoming visible to the naked eye. Further signs of slowing: Consumer confidence is down as of the November reading–not a truly dramatic decline, but enough to require caution, especially as regards how rich retailers will feel after the holidays have become history. Even more significantly, durable goods orders for October were down by a rather steep 5.5%. This suggests that the much-touted slowdown is very real. Note: If we have an enduring slowdown, the chances of a major recovery in the stock markets become relatively slim. As we continually argue, we are headed into a buying opportunity for real estate investors. Every effort has been made to verify the information herein, but it cannot be guaranteed, or should it be used as a substitute for professional advice. Copyright (c) 2000. All Rights Reserved |
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Some noticeable trends have emerged recently |
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1) Good News The good news is that such data convince the Fed (and the markets as a whole) that the economy is slowing, and perhaps at just the rate Alan Greenspan was dreaming of. This not only takes the pressure off interest rates, but also raises the possibility that we’ve seen the highs for the current cycle and may start seeing lower rates. Indeed, there are voices suggesting that the Fed may reduce rates rather than raise them in the near future–still a doubtful prospect. 2) 30-year T-bond The 30-year T-bond has indeed eased to 5.67%, and the 10-year note rests at 5.58%. With the conventional 30-year fixed-rate mortgage available at slightly below 7.5%, there are few reasons to waste time worrying about the possibility that the real estate market might fall off a cliff. At least, not for the moment. 3) Price of gold If gold’s value continues to rise, it may be a signal that either (1) inflation is more likely to rise than we currently believe or (2) the level of fear in the world (about a presidency that is still up in the air and a potentially weak administration that will result, about the unrest in the Middle East, about who-knows-what else) is causing investors to seek the apparent security of the world’s oldest and hardest currency. Or both (though the remaining commodities–other than oil–argue that the signs of inflation are mostly written across the furrowed brows of Inflation Hawks and nowhere else). |
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