INFO THAT HITS US WHERE WE LIVE... No one has been more resolute and determined than those working in the housing market and, yes, more opportunities are arising. Last Tuesday new single-family home sales were reported up 2.1% in May, to a better than expected 476,000 annual rate and up 29% versus a year ago. There were 4,000 more units in inventory, so the months' supply edged up to 4.1, despite the faster sales pace. But that's well below the 5.7-month average of the last 20 years and near the 4-month average of the 1998-2004 housing boom. So as sales grow, builders do have room to increase inventories.

The median sales price of new homes, at $263,900, is up 10.3% versus a year ago, while the average price of $307,800 is up 9.6% for the year. And prices are up for all kinds of sales. The FHFA index of prices for homes financed with conforming mortgages is up 7.4% in the last year. The Case-Shiller index of home prices in the 20 largest metro areas is up 12.1% from a year ago. Both indexes have been up for 15 months in a row. Thursday, Pending Home Sales (contracts signed) hit their highest level in six years, up 6.7% in May and up 12.1% versus a year ago. This forward-looking indicator points to solid gains for existing home sales in the months ahead.

BUSINESS TIP OF THE WEEK... As you attempt to develop new ideas, avoid relying on what worked in the past. Instead, focus like Steve Jobs on understanding customers' unmet needs, then figure out how to meet them.
>> Review of Last Week
BAD NEWS BRINGS GOOD NEWS... The bad news came when the final estimate for Q1 GDP calculated economic growth at a super slow 1.8% annual rate. That was well below the prior 2.4% growth estimate, which forecasters thought would hold. But the bad news was good news to investors, who felt that evidence of a weaker economy would keep the Fed from tapering its bond buying program, which has helped boost stocks as well as the recovery. After 5 volatile days, the major stock indexes closed up for the week. Traders seeking more comfort from bad news got it Friday when the Chicago PMI showed Midwest manufacturing weaker than expected in June.

But wait! There was a slew of economic reports that surprised to the upside. May Durable Goods Orders and Personal Income, and June Consumer Confidence and Michigan Consumer Sentiment all outpaced estimates. The housing recovery, which has been stronger than the overall economic recovery, continues to build. New Home Sales, Pending Home Sales, and the Case-Shiller 20-city Index of home prices all beat expectations. Even weekly Initial Unemployment Claims dipped by 9,000, to 346,000, with Continuing Claims still comfortably under 3 million.

The week ended with the Dow up 0.7%, to 14910; the S&P 500 up 0.9%, to 1606; and the Nasdaq up 1.4%, to 3403.

The big dip in Q1 GDP helped bond prices, as Treasuries scored only their second weekly gain in two months. The FNMA 3.5% bond we watch ended the week up 1.02, at $101.14. National average mortgage rates posted their largest weekly gain in 26 years, according to Freddie Mac's Primary Mortgage Market Survey for the week ending June 27. Remember, mortgage rates can be extremely volatile, so check with your mortgage professional for up to the minute information. But rates are still attractive. The Mortgage Bankers Association had purchase loan demand up 3% for the week, and up 16% over a year ago.

DID YOU KNOW?... The new Mortgage Credit Availability Index from the Mortgage Bankers Association and an independent information provider gauges whether mortgage credit is more or less available month to month. It rose in May.
>> This Week's Forecast
MANUFACTURING AND SERVICES UP, JOBS SLOW, UNEMPLOYMENT HOLDS... Today, the June ISM Index will tell us how the manufacturing sector of the economy is faring and economists expect a reading just into expansion territory. Wednesday's ISM Services should show that sector, already expanding, up again in June. The big news will be Friday's June Employment Report. Job growth is forecast to continue at a slow pace, with 165,000 new Nonfarm Payrolls added during the month. Analysts do not expect the Unemployment Rate to drop from 7.6%.

Thursday July 4, financial markets will be closed in observance of Independence Day.
>> The Week's Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of July 1 - July 5
DateTime (ET)ReleaseForConsensusPriorImpact
M
Jul 110:00ISM IndexJun50.549.0HIGH
W
Jul 308:30Trade BalanceMay-$40.8B-$40.3BModerate
W
Jul 308:30Initial Unemployment Claims06/29348K346KModerate
W
Jul 308:30Continuing Unemployment Claims06/152.955M2.965MModerate
W
Jul 310:00ISM ServicesJun54.053.7Moderate
W
Jul 310:30Crude Inventories6/29NA0.018MModerate
F
Jul 508:30Average WorkweekJun34.534.5HIGH
F
Jul 508:30Hourly EarningsJun0.2%0.0%HIGH
F
Jul 508:30Nonfarm PayrollsJun165K175KHIGH
F
Jul 508:30Unemployment RateJun7.6%7.6%HIGH

>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months... Investors worry the Fed will start tapering their quantitative easing (QE) bond buying program by the end of the year. But no one expects the central bank to raise its super low Funds Rate until well into next year. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.
Current Fed Funds Rate: 0%-0.25%
After FOMC meeting on:Consensus
Jul 310%-0.25%
Sep 180%-0.25%
Oct 300%-0.25%

Probability of change from current policy:
After FOMC meeting on:Consensus
Jul 31 <1%
Sep 18 <1%
Oct 30 <1%