This week...

The Lumpy Rising Path

Other than providing a lift to stock and bond market values, the past holiday-shortened four-day week gave scant insight into market trends. It appears, perhaps, that the current trend is not to have a trend.

There were the pleasing green shoots, though—hints of improvement in the overall economy and the real estate market itself. The former basked in the pleasure of seeing the Index of Leading Indicators climb by a full percentage point in December—reinforcing the strong 1.1% gain in November. The Conference Board, which compiles these figures, cautioned that the economic growth ahead—based on the current economic activity measured by a so-called "coincidence index"—will likely be uneven (to use their word). Yes…and what else is new?

What's new, in this observer's view, is that the improvement in the Leading Indicators looks quite good for two months in a row and, though the path may continue to be lumpy in the coming months, we can imagine—if not actually plan for—an improving economy six months from now.

And there are a few more relevant details involved. The strongest of the Leading Indicators, unusually, was the number of permits taken out last month to build new real estate structures. Now, the pleasant 16.7% overall jump in the number of permits (5.5% for single-family residences) was the most significant factor in the rising Index of Leading Indicators. Its size may have resulted in part from a rush among builders to get permits before new fees and codes are in place, but it is still a very strong advance. (Its strength was not reflected in the housing starts figures for the same time period—largely, it seems, because poor weather stalled a great many construction starts across the nation.)

The National Association of Realtors reported a 12.3% rise in completed sales of existing homes—and this offered a validation of the earlier Pending Home Sales Index reports from October and November that had suggested completed sales should increase by December. (Even the satisfying 12.3% rise in the number of sales failed to meet year-prior sales levels, though, falling 2.9% behind them.)

Also pleasing was the week's report on the prior week's new claims for unemployment insurance, which fell by 37,000 from two weeks ago to 404,000. While this decline does suggest the unemployment picture may be improving at last—though the jury is still out on this one—we really won't have a truly improving jobs situation until that number declines to about 300,000…just as we won't be able to say our employment picture is truly brightening until the economy is consistently adding about 200,000 jobs a month.

Current economic indicators, though, seem to suggest that we will see these goals reached—and, one would suspect, surpassed. Not soon, but the improvements are distant sparks on the horizon (or the smallest of green shoots in our still-weedy economic garden).

Most likely, in the bigger picture, interest rates will in the main continue to dance in place, rising very gradually, unless we run afoul of an unexpectedly bad piece of economic news…a small European nation defaulting, perhaps, or any number of other possibilities. The trend, weak and lumpy though it may be, is upward, in any case. Good time for wise home buyers and homeowners to finish their purchases and refis.