For all the chatter about impending economic doom, it's amazing how the economy keeps plugging along. To wit, the Commerce Department reported that orders for manufactured goods rose 2.3% in December, following a revised 1.7% increase in November. The report is evidence that the putative economic slowdown has yet to hit America's producers of durable products.
All of America's producers – durable and otherwise – are producing what they produce more efficiently, as well. Worker productivity grew at a 1.8% annual rate in the final quarter of 2007, a faster-than-expected pace, which suggests productivity remains healthy and labor costs remain tame.
The productivity report provides the Federal Reserve with more wiggle room to continue lowering interest rates, if needed. And the Fed just might need to. The NAR's pending sales index posted at 84.9% in December, 24.2% below the 113.3 posted in December 2006. The NAR projects existing-home sales at 5.38 million this year and 5.60 million in 2009, with existing-home prices falling 1.2% to a median of $216,300 for all of 2008 before climbing 3.2% to $223,200 in 2009.
NAR chief economist Lawrence Yun predicts sales activity will remain soft through the first half of the year, but he hedges his prognostication by saying that the market could improve more quickly if the higher conforming loan limits are implemented sooner.
Eric P. Egeland
RE/MAX Advanced (Deerfield)