Week of June 21 – 25, 2010

NATIONAL ASSOCIATION OF REALTORS® ResearchProduced by NAR Research

Weekly Economic ForecastIndicator This Week Last Week

GDP 2010 Q2: 3.0% 2.9% ↑

GDP 2010 Q3: 2.7% 2.7% ↔

GDP 2010 Q4: 2.8% 2.8% ↔

Unemployment rate by the year-end 2010:

10% 10% ↔

Average 30-year fixed mortgage rate by the year-end 2010:

5.2% 5.2% ↔

NAR's monthly official forecast as of June 2nd

Produced by NAR Research

Monday, 06/21/10•China, under pressure, will permit its currency to be flexible, which means letting it rise in relation to the U.S. dollar. The standard textbook analysis would say that U.S. can export more and import less as Chinese products will become more expensive.•The end result, however, could be a higher U.S. trade deficit if Americans continue to buy Chinese goods, but now at a higher price. Also, a weaker U.S. dollar will mean higher oil price and higher inflationary pressure, perhaps not now, but in 2 or 3 years from now. That will automatically force up mortgage rates.

Economic Updates

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Tuesday, 06/22/10

•Existing-home sales remained at elevated levels in May on buyer response to the tax credit, characterized by stabilizing home prices and historically low mortgage interest rates. Gains in the West and South were offset by a decline in the Northeast; the Midwest was steady.•Existing-home were at a seasonally adjusted annual rate of 5.66 million units in May, down 2.2 percent from an upwardly revised surge of 5.79 million units in April. May closings are 19.2 percent above the 4.75 million-unit level in May 2009; April sales were revised to show an 8.0 percent monthly gain.

Economic Updates

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Wednesday, 06/23/10•Application filings for home purchase slid a notch in the past week. The overall trend has been downward in May and June - after the tax credit. The current level is the lowest since 1997.•However, the application data has not correlated well with home sales data in recent years. First more buyers are making more all-cash home purchases. Second, a consolidation in the mortgage industry may have created less consistency in data reporting from the Mortgage Bankers Association. Expect weakness in home sales in the upcoming months, but not in the magnitude of going back to 1997 home sales.

Economic Updates

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Wednesday, 06/23/10 (Cont’d)

•New home sales plunged to 300,000 in May from 446,000 in April. The current very low home sales reflect the post-tax credit impact. Also, builders just have not been constructing new homes and hence automatically there will be fewer new homes available for sale. •Interestingly, new home inventory is at one of the lowest points in past 30 years. Builders are not building, partly due to the difficulty in obtaining construction loans.

Economic Updates

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Thursday, 06/24/10

•The number of people requesting unemployment checks for the first time declined in the past week and is much lower than one year ago. •However, the current figure of 457,000 is still too high. It needs to fall to under 400,000 to make a dent in the unemployment rate.•The total number of people continuing to receive unemployment benefits also remains high attesting to the difficulty of finding a new job.•Durable goods orders fell 1.1 percent in May but are comfortably higher than a year ago, 14.9 percent above May 2009.•Overall the economy is still expanding, but not robustly. Job recovery is slow.

Economic Updates

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Friday, 06/25/10•The Department of Commerce’s Bureau of Economic Analysis lowered its estimate of Gross Domestic Product growth during the first quarter of 2010 from 3 percent to 2.7 percent due to decreased estimates of consumer and business spending. The economy now has had three quarters of economic growth following the declines of the Great Recession, but the recent 2.7 percent growth rate is lower than the 5.6 percent growth rate experienced during the fourth quarter of 2009. •The significance for Realtors® is that the improvement in home sales, which are strongly impacted by job gains, will probably be modest due to the slow GDP recovery as we emerge from the Great Recession.

Economic Updates

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Friday, 06/25/10 (Cont’d)

•The University Of Michigan Index Of Consumer Sentiment rose in June to 76.0 from a level of 73.6 in May, pushing the Sentiment Index to its higher level since January 2008. Richard Curtin, the Chief Economist for the Survey, indicated that consumers expect economic growth to be slow in the forthcoming year, accompanied by continued high unemployment. However, overall consumer confidence is strong enough to support the continued economic recovery.•Again, the employment implications as we emerge from the Great Recession are disappointing, supporting the overall projection of a slower than normal improvement in the housing markets.

Economic Updates

Produced by NAR Research