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player ready...REAL ESTATE
Fading a bit
As the nation’s retailers continue to lick their wounds from a so-so holiday spending season, economists say things weren’t all that bad. One reason: While store owners cooled their heels, Americans were busy buying shiny new cars and spanking new homes.
The emphasis of consumers’ wallets has shifted away from throwaway trinkets and glistening gewgaws to basic items of long-lasting value. Topping the list, of course, is real estate.
That brings us to Tuesday’s report of December housing starts. Economist Sung Won Sohn is looking for a dip, to an annual rate of 1.69 million units from 1.697 million in November.
“The housing industry enjoyed a banner year in 2002, but this pattern won’t be exactly repeated this year,” said Sohn, of Wells Fargo & Co.
Mortgage rates are slightly on the rise, he said, because money is being drawn away into the stock market, corporate bonds and other areas of investment.
“By the end of this year, long-term mortgage rates should hit a level of about 6.5 percent,” he said, up from current levels below 6 percent. “That’s not dramatic, but it would put a damper on a housing market that has been wonderful for several years.”
A slowdown of activity already is taking place, according to Sohn, in locales that are seeing big layoffs among factory workers. In those areas, he said, sellers are seeing resistance even at price points between $200,000 and $500,000, considered a stronghold elsewhere.
LEADING INDICATORS
What momentum?
The index of leading economic indicators, a forecasting tool that peers six months or more into the future, bumped along for most of 2002. But a 0.7 percent leap in November prompted talk that the expansion is picking up momentum.
Another measure comes Thursday, and economist Lynn Reaser says it will show the economy “still isn’t entirely out of the woods.” She is looking for the reading to be flat.
“The strong November report prompted a belief that the economy was snapping out of the doldrums,” said Reaser, of Banc of America Capital Markets in St. Louis.
Unfortunately, since then there have been disappointing numbers relating to holiday sales, consumer confidence and industrial production, she said. Additionally, fuel prices have risen, taxing the economy.
“Not all the numbers have been encouraging,” Reaser said. “But the good news is that there is no sign we are slipping back toward recession.”
FEDERAL RESERVE
Steady as they go
Members of the Federal Reserve meet on Jan. 28-29, with few analysts expecting any action on policy. With interest rates at a 41-year low, any further loosening of monetary policy would be viewed as a threat to the wavering dollar.
The greenback is off about 17 percent against the euro over the last 12 months, with lesser declines against other currencies. Members of the Fed are in no mood to grease the skids. So watch for rates to hold steady.
EQUITIES
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Focused on Iraq
The stock market has been barely able to keep focused on fourth-quarter corporate earnings, as investors remain transfixed by the situation in Iraq and the Middle East.
This week, additional bottom-line results roll out from high-tech companies and banks.
Meanwhile, stock, bond, commodities and options markets will be closed Monday for the Martin Luther King Jr. holiday. The weekly auction of short-term Treasury bills will take place Tuesday.