Joan’s Real Estate Corner… June Pending Home Sales Rise

For the second consecutive month, pending home sales figures have increased. According to the National Association of Realtors® (NAR) all regions are showing “strong double-digit” gains over last June and the index itself was up 2.4 percent for the month.

Pending sales are a healthy 19.8 percent above June 2010’s numbers. The Midwest has seen the largest rebound from 2010, increase 26.4 percent from last June. The Northeast followed at a 19.4 percent increase and the South gained 19.1 percent. The West was up 16.4 percent.

According to the NAR, “Existing-home sales this year are expected to total 5.0 million, slightly higher than 2010. Similarly, little change is forecast for aggregate home prices with several indicators, including NAR’s median prices, showing recent signs of stabilization.” Read more

What we try to do is evaluate what point of view those who have some influence on the outcome might favor. If the big players want something to happen, they might just get their way. Try to think of who wins and who loses in each scenario and ask yourself who might be able to sway the odds.

Issue of the Week

For the next several weeks, barring some unexpected outcome, we will be prone to discuss the progress or lack thereof in the US deficit ceiling talks. The way this works is that the US can only issue debt that has been authorized by Congress and Congress decided many decades ago that without limiting the volume of debt available to be issued, they’d be likely to spend and spend until the US economy collapsed under the weight of Treasury debt. How prescient they were. Read more

We are facing another earnings season directly ahead. Should we be worried? Well, that depends a lot on what you think the market thinks this earnings season will produce. If you believe that the market is expecting another big earnings season, you may be in for some disappointment. However, if you believe that earnings will grow at a decent clip, without much help from the economy in general, then you might just be in for a nice little surprise. Our guess is that earnings will grow at something above 10% year-over-year but not by the 30% that we had become accustomed to last year. Read more

For those who would rather not read the Declaration of Independence in its entirety, just skip ahead about 4 pages. Much of the middle part, starting on the next page won’t make a lot of sense, because you’ve been protected from such actions by a government that doesn’t look upon its citizens as cogs on a wheel, to be trampled whenever it suits it. But, you will also see why when the founding fathers were finally finished with the Constitution, they added the Bill of Rights right away.

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Bon Voyage, QE2

Time for another visit from the Marshallian K. For those who even remember this obscure economic theory we’re sorry to have to go over this again, but we have to go over this again. The theory goes that excess money in the economy (that is money supply over and above the transaction demand for money, or the price of goods times the volume of goods divided by the velocity of money) will seek its best use and that use is usually in the securities markets in the short run. Money can be more effective when used for investment in physical plant and equipment or inventories or some other largely illiquid investment. But, when the supply of money rises suddenly the easiest way to make that money return anything is to put it in the securities markets (think in terms like putting it in a money market fund instead of as cash in your pocket). So, when QE2 began last October the securities markets started rising, though not right away. This is an element in the Fed’s outlook that the end of QE2 won’t have a meaningful impact on the real economy. Most of this money never reached the real economy in the first place. Read more

We have seen fear come back into the markets with a vengeance. We have rebuilt the so-called “wall of worry” that the market seems to need to climb. As a quick indicator of that, the bullish percentage in the American Association of Individual Investors weekly sentiment poll has fallen to 24% recently from 43% in early April. The bears have grown to 48% from 29% in the same period. Typically, when twice as many people are bearish as bullish the market tends to rise. Just as when roughly twice as many people are bullish as bearish, it tends to fall. Read more