Finance Column » Your Money This Week » What’s with housing and consumers?

What’s with housing and consumers?

By Mark Hamrick · Bankrate.com
Monday, June 24, 2013
Posted 6 am ET

Federal Reserve Chairman Ben Bernanke seemed to startle the financial markets last week when he outlined a scaling back and eventual end of the Fed's monthly asset purchases. But he also cautioned that the economy and financial conditions would need to support that "tapering."

So, as we plow through the coming week's calendar of economic reports, we're reminded that the Fed, too, is watching to see how things develop over the coming months. At issue is how much more the central bank will expand its massive balance sheet, with the goal of encouraging growth and driving down unemployment.

What's on tap?

Three of the week's readings involve housing, which was ground zero for the financial crisis. Similarly, housing has been leading the economic recovery.

These are among the reports on tap:

  • Standard & Poor's/Case-Shiller home-price index for April, due Tuesday at 9 a.m. (All times Eastern.)
  • Consumer confidence for June from The Conference Board, due Tuesday at 10 a.m.
  • New home sales for May from the Commerce Department, due Tuesday at 10 a.m.
  • Pending home sales for May from the National Association of Realtors, due Thursday at 10 a.m.
  • Personal income and spending from the Commerce Department, due Thursday at 8:30 a.m.

Focus on housing

Last week, the National Association of Realtors released a fairly upbeat reading on home sales. Within that report, we learned that the national median price for existing homes stood at $208,000 in May. That was up 15.4 percent from May 2012.

This week, we'll find out how new homes are selling. One wild card for the housing market is the recent upward spiral in mortgage interest rates. Bankrate's survey of mortgage rates last week indicated a decline for the benchmark 30-year fixed, down to 4.12 percent. That marked a slight dip from the highest levels in more than a year.

"All the indicators are pretty overwhelmingly positive" for the housing market, says Walter Molony, spokesman for the National Association of Realtors. He adds that the S&P/Case-Shiller report probably will show a double-digit increase in home prices. But the Realtors' trade group looks for mortgage rates to rise by a full percentage point over the course of the coming year.

Are consumers wincing yet?

This week's report on consumer confidence will follow a reading for May that was the highest in five years for The Conference Board's closely followed index.

The Labor Department indicated that the job market also continued to improve in May. Additionally, last month, retail sales rose 0.6 percent, while sales excluding automobiles were up 0.3 percent, the government reported. Those might be termed modest gains, but gains nevertheless.

More recently, the stock market has grown increasingly volatile, including steep declines after Bernanke talked tapering. Could those Wall Street storm clouds extend to Main Street?

"Consumers that view their wealth from a stock market perspective have taken quite a drubbing in the past two weeks," notes retail expert Britt Beemer, chairman of America's Research Group. "I would certainly expect that those consumer confidence ratings will drop."

The fresh reports on confidence and income and spending will offer some guidance on how consumers are faring.

This week in business history: Credit unions

It was June 26, 1934 that President Franklin D. Roosevelt signed into law the Federal Credit Union Act. As the name implies, it established a federal system of credit unions, while allowing the institutions to be chartered under federal or state law.

The National Credit Union Administration says federally insured credit unions had nearly 95 million members in the first quarter of 2013 and held more than $1 trillion in assets.

Follow me on Twitter: @hamrickisms

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