The Dow is not disappointing my predictions up to election day, going back and forth from 12,500-13,500. The Dow ended last Friday at 13107.21. A couple of reasons given were weaker U.S. corporate earnings and more of Spain’s problems raising its ugly head again. It is earnings season still and Facebook reportedly beat their own 3Q expectations, which in itself was an early Christmas present. The earnings season is doing better overall, in my opinion. The nation’s second largest tobacco company, Reynolds American, reported a third quarter profit of almost 7 percent. I do not know how many billions of dollars that translates into, but still surprising results. FedEx is reporting that they expect better holiday delivery numbers this year. “Third-quarter fears starting to dissipate” was a headline in the S.A. Express News, which more or less said corporate earnings are not as bad as some would believe. “I think it’s intriguing that everyone thinks earnings are falling off a cliff,” said Steve Stovall , chief equity strategist with S&P Capital IQ. Another quote in the same article, “All in all, I’m a tad encouraged by the earnings season and the sense that we are seeing more people beat expectations,” said David Brown, CEO for Sabrient Systems, a research firm. Once again, the economic “sky is falling” scenario is not holding water.
The U.S. economy grew at a faster rate from July-September, as the GDP growth rate was 2 percent. These were better than expected growth numbers for the U.S. and better than the last quarter number of 1.3 percent growth. The economic “Grim Reaper” is going to be let down this coming week too, as a survey by the National Retail Federation predicts consumers will spend an average $79.82 on party décor, candy, and costumes this Halloween season---$7 more per person than last year. One final bit of good news is that weekly jobless claims fell last week by 23,000. The U.S. Consumer and better employment numbers are what are boosting our economy, as are better gas prices as the pump. The next big economic impact could come in the form of “Frankenstorm Sandy.” The hurricane is predicted to pound the U.S. Northeast and cause havoc, spreading over 900 square miles and affecting millions of people and commerce as well. I am glad to be here in Texas where it is nice, safe, and warm. My prayers do go out to our Northern friends.
Real Estate, Mortgage Industry, and Other Economic News
Nationally, new home sales jumped last month by 5.7 percent, to the highest level in more than two years. Existing home sales contracts rose in September too, as the National Association of Realtors said its seasonally adjusted index for the month was 99.5, up from 99.2 the previous month. U.S. home values rose 1.3 percent in the third quarter of 2012, marking the fourth consecutive quarter of increases. The Zillow Home Value Index also rose on an annual basis, increasing 3.2 percent year-over-year to $153,800, according to Zillow’s third-quarter survey report.
Mortgage rates have remained low, except for a few days of slight increases and then back down again, throughout all of 2012. The Fed has promised to keep short-term interest rates low through mid-2015. Keep in mind that, even though short-term rates will be kept low, they do not necessarily include mortgage rates, as they are considered long-term. So what is the definition of “low” mortgage rates?” That is most likely to be left up to one’s own definition. However, in my opinion, low mortgage rates could be anything, including where they are now, in the mid 3% to 6%-7%. Remember not so many years ago when mortgage rates were 9%-10%. My first mortgage was at 9.5% and I thought that was good back then, over 20 years ago. After the election, I really do expect mortgage rates to rise. I am guessing that rates will increase to 4.5%-5.5% in 2013 for the 30-year fixed rate index. This is only a guess on my part, but others agree with me. When that happens, I also predict even better home sales, as buyers will be jumping off the fence to head off increasing home prices and mortgage rates. I know I sound like a broken record, but now is the time to buy the home of your dreams.
( This article is for informational purposes only. Do not use it as financial advice. For questions/comments call Tony Stevenson at 1.800.460.6990 or email: firstname.lastname@example.org.)