“AN OPTIMIST WILL TELL YOU THE GLASS IS HALF FULL; THE PESSIMIST, HALF EMPTY; AND THE ANALYST WILL TELL YOU THE GLASS IS TWICE THE SIZE IT NEEDS TO BE.” Anonymous.
And indeed – last week certainly contained news that could cause you to view the economy in an optimistic or pessimistic light – let’s take a closer look.
Good earnings reports from financial companies continued as Bank of America reported earnings that were ten times greater than expectations – that’s right, TEN times better. The company also said it earned more in the first quarter of 2009 than through all of 2008, largely a result of enormous refinancing activity. In addition, Treasury Secretary Tim Geithner said that most banks are well capitalized, and there are signs that credit market conditions are improving, which is definitely something to be optimistic about. However, as earnings season marched on, there were also some weak reports, including clinkers from The Bank of New York, Caterpillar, Dupont, Coca-Cola, Merck and United Technologies.
On the national housing front, New Home Sales came out slightly better than expected, and it was especially good to see that the inventory number continues to fall – now at a 10.7 month supply, compared with February’s 11.2 months.
Existing Home Sales came in slightly below market estimates – and while the report showed that Existing Home inventory in March fell by a modest 1.6%, at the current sales pace it would take an estimated 9.8 months to sell that inventory of properties, slightly longer than February’s 9.7 month reading. The path back to economic recovery will go through housing, and these reports will be important to watch in the months ahead.
Pasadena’s real estate market is definitely on the rebound. Read my latest report for Pasadena housing for the month of March 2009.
In other news, Initial Jobless Claims were reported in-line with expectations. Initial Jobless Claims are a leading indicator and last week’s number does not yet suggest that the employment market is starting to improve. And March’s Durable Goods Orders marked the 7th negative reading in the last 8 months, as tighter credit and lack of business investment is continuing to fuel these negative numbers.
However, it will be interesting to see how these numbers change with lending abilities now freed up following the recent relaxation of mark-to-market accounting rules, which will in turn make it easier for businesses and consumers to buy and spend.
We have been talking a lot about Mark-to-Market accounting rules here on the Pasadena real estate blog. Read the full explanation of how the Mark-to-Market rules affected us.
Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and Pasadena home loan rates improve, while strong economic news normally has the opposite result. And last week’s mix of news saw money flowing back and forth from Stocks to Bonds, with Bonds and home loan rates ultimately ending the week very close to where they began.