Wed, Mar 21, 2012, 2:43 PM EDT - U.S. Markets close in 1 hr 17 mins
Click! Follow Us on Facebook!
Existing home sales data for February were released this morning and the results were slightly weaker than expected. February sales dropped to a 4.59 million annual run rate; 0.9% lower than January's revised 4.63 million figure. According to Bloomberg, analysts had been expecting 4.61mm.
With rates for 30-year mortgages creeping back to 4% and Fed Fund Futures suggesting higher rates to come, Breakout welcomed RBS senior economist Michelle Girard to tell us just how concerned we should be about these trends and what they mean for the recovery.
In the attached clip Girard tells me the markets best get used to a slowdown in the pace of improvement. "We've been a little spoiled in the last couple months when all the housing numbers have surprised us to the upside," she says.
The gains of the last few months have been driven at least in part by warm weather during the Winter That Never Happened on the East Coast. The warm weather had the effect of flattening the seasonal demand for housing, according to Girard.
"People have already been out shopping" says Girard. "In the Springtime the numbers won't look quite as good as they did in the winter, simply because we already saw that activity taking place."
The economist takes a more positive view of this data, suggesting increased consumer confidence and jobs data will keep the housing recovery on track, slow though that path may be.
Girard isn't sweating higher mortgage rates, either. She thinks the positive mood and jobs data in America, not to mention a sense of urgency driven by the prospect of rising rates, will help get potential buyers "off the fence," particularly with rates still at historically low levels.
As for rates continuing their recently rising trend, Girard believes the jury is decidedly out.
"2013 is still a year of great uncertainty because we have so much on the fiscal side that has to be decided," she says. The combination of Bush-era tax cuts expiring and mandatory spending cuts have the potential to stop any nascent recovery dead in its tracks.
Girard says rates "should" be inline with nominal GDP. "If we have the economy growing at 2.5% and inflation lets say 2%, then nominal GDP of 4.5% would suggest that 10-year yields should be a lot higher than where they are today." By Girard's math that would mean the 10-year would roughly double in yield from the current 2.30%.
Will it happen? You should hope so. Rising rates correspond with higher stocks and improving economies. At least under normal circumstances.
After 5 years in the economic gutter we could all use a little normal right about now.
As always, we want to know what you think. Let us know in the comment section below, Tweet me @Jeffmacke or visit us on Facebook.
Do you think the Chinese economy is in for a hard landing or a soft landing in 2012?
Breakout is Yahoo! Finance's new daily all-out, roll-up-your-sleeves, dive-in, interactive investing show, offering fresh segments throughout the trading day. If you love making money, if you want to protect what you have, if you're passionate about understanding these crazy markets, you're in the right place. Welcome!
MEET THE TEAM: Matt Nesto, Jeff Macke, Aaron Task, Jennifer Carinci and Kevin Chupka
The market has seen only one day with a 1% decline in 2012. While the rally may seem unstoppable, there's a lot of stuff happening. More than enough to call an audible and update the market's field position and let you know some ways to play it.
As one of the best known and longest serving oil and gas industry executives in the world, Boone Pickens has pretty much seen it all in his 60 year career, except for one thing: A national energy policy. While natural gas gets a lot of attention for being abundant, cheap, and cleaner than oil, Pickens says don't expect prices to rise off 10-year lows anytime soon.
Crude oil and gasoline prices at the pump are rising by the day, driven mostly by Middle East tensions. This is putting the biggest risk premium in prices since 2008, according to oil analyst Phil Flynn. Once the conflict ends, gas prices could come tumbling lower.
Global Research
Investor Education
They may not have access to the armed forces but it is often argued that … More » 3 Ways the Federal Reserve Is Impacting Your Money
One of the most passionate but unresolved debates in the investment world … More » Value vs. Growth Stocks: Which Is the Better Inves …
Like it or not it's time to pay the price for being an American: that's … More » It's Tax Season Again! Tips for Every Investor
As we enter into the heart of tax season across America, and people of … More » 5 Ways to Meet Your Retirement Goals
Facebook's much-anticipated IPO --which stands for initial public offering-- … More » Facebook's IPO: What to Know Before You Buy
Reading List
Trading Terms & Dictionaries
Roll over each section to subscribe using Add to My Yahoo! or RSS Feed feeds.
Widely misquoted lines from famous movie …
Rock legend erupts in anti-Rihanna rant
Saints severely punished for 'Bountygate …
Broncos trade quarterback Tim Tebow
Amazing homes from around the world
Historic dunk in women's NCAA tourney
Quotes delayed, except where indicated otherwise. Delay times are 15 mins for NASDAQ, NYSE and Amex. See also delay times for other exchanges. Quotes and other information supplied by independent providers identified on the Yahoo! Finance partner page. Quotes are updated automatically, but will be turned off after 25 minutes of inactivity. Quotes are delayed at least 15 minutes. All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.
Fundamental company data provided by Capital IQ. Historical chart data and daily updates provided by Commodity Systems, Inc. (CSI). International historical chart data and daily updates provided by Morningstar, Inc.
Yahoo! - ABC News Network
Read Full Article »