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The FED and Housing

September 21, 2011 – 5:00 pm

As we wait for the Fed’s meeting to end this afternoon the market has been treading water. The expectation is that there will be only small tweaking to the interest rate policy and maybe they will encourage the banks to loan by not paying them any interest for money they deposit with the FED. There is just not a lot of expectation from them.

On the economic front we saw new construction for homes and existing homes sales reports released both for August. New construction was down 5% from July with permits up 3.2%, the highest level since January. There is still no improvement but permits rising year over year 8% and the month over month improvement means we will have a little better numbers going forward. Of course permits do not necessarily mean actually building but most of the time they do because it is not easy getting those permits so you do not apply for them unless you are serious.

Existing home sales rose 7.2% to 5.03 million when the expectation was for it to go up 4.8 million from 4.67 million in July. That was a nice surprise.

However, housing is still in a deep slump and will likely stay that way for not just months but for several more years. Prices appear to be flattening out and may well rise next year but it is going to be at such a slow pace that it won’t be noticed. Until foreclosure sales go down and first time buyers go up improvement is not going to happen.

Good Trading
Steve Peasley

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