Latest Data Remains Lackluster Housing starts and building permits continued to pull back in May. Housing starts fell to their lowest levels since March 1991 while building permits declined 1.3% from the previous month. Sluggish conditions in the housing markets also caused builder confidence to fall to all-time lows with the NAHB Housing Market Index (HMI) dropping a single point to 18 which ties the lowest reading ever recorded in the index's 22-year history.

The same negative catalysts that have plagued equity markets in the past several months were at work again last week. Negative housing news, concerns of possible collapses in the financial sector, and rising crude prices dragged the Dow Jones Industrial Average down to its lowest levels since mid-March. The broader S&P 500 index also closed trading at around its lowest levels since March 19. Crude prices ended Monday's trading session higher as violence in Nigeria continues to cause declines in production. Crude ended the trading session today up about 1% to $136.74/barrel.

This week will be full of housing and economic reports that will give us a better gauge on the current conditions in the market. Reports on May new and existing home sales will show whether the spring home-buying season this year showed any promise for a rebound in housing while final GDP estimates gives a clearer picture on economic growth domestically. The Federal Reserve will also be meeting this week and is widely expected to keep rates unchanged. The Fed is struggling to find a balance between increasing inflationary pressures and a fragile economy.

The Economy Housing starts fell 3.3% to a seasonally adjusted annual rate of 975,00 in May which is the lowest pace since March 1991. Total permit issuances also dropped 1.3% from April levels with single-family issuances declining 4.0% from the previous month. The number of multi-family (5+) building permits jumped 6.4% to 314,000 in May.

Leading economic indicators posted slight gains suggesting that the worst of the economic downturn may be behind us. Leading indicators in May posted a 0.10 point increase for the third straight month. The leading index now stands at 102.10, up from an April figure of 102.00. The index is down 0.70 points from its levels six months ago when it was 102.80. Only four out of the ten components posted a monthly increase.

Price data in May also showed slight signs of rising inflationary pressure with increases in both consumer and producer prices. Higher food and energy prices caused the consumer price index to jump 0.6% on a seasonally-adjusted basis while core prices increased 0.2% on a seasonally-adjusted basis from the previous month. On an unadjusted basis, headline CPI increased 4.2% from its year ago levels while core CPI increased 2.3% year-over-year in May.

Housing Market National average mortgage rates increased to 6.42% in the latest Primary Mortgage Market Survey released weekly by Freddie Mac on June 19th. This is the fourth straight week that rates have increased and the highest rates have been since September 2007. In the week ending June 18th, the MBA's seasonally-adjusted Purchase Index declined to 360.2 from 376.2 in the previous week. Purchase applications have declined in two out of the past three weeks. The latest figure reflects a 4.25 percent decrease from last week and a 20.12 percent drop from the same period last year.

New and existing home sales moved in opposite directions in April. New home sales posted a rare 3.3% increase in April to a seasonally-adjusted 526,000 homes, up from a revised March figure of 509,000. This is the first time since October 2007 in which seasonally-adjusted annualized sales have posted a monthly increase. Sales for the previous three months, however, were revised lower by 30,000 units. At the current sales pace, there are 10.6 months of new homes supply on the market. The number of new homes for sale continued to decline as builders continue to scale back production. New home inventory declined to 454,000 which is the lowest it has been since May 2005. In April, median new home prices rebounded from its lowest levels since September 2006 in March to $246,100 in April. It was also the first time since November that median new home prices recorded a year-over-year gain.

Annualized sales of total existing homes declined 1.0% in April to 4.89 million units. Sales of existing homes are down 17.5% from the 5.93 million units in April 2007. Median existing home prices in April increased for the second straight month to $202,300 from a revised $200,100 in March. The number of existing homes for sale increased jumped 10.5% to 4.552 million units in April. At the current sales pace, there are 11.2 months of existing homes supply on the market. Existing home affordability declined slightly in March due to the increase in median existing home prices.

Market Highlights:

South New Jersey, NJ: 153 net new home sales during April 2008 with a median minimum price of $369,950

Baltimore, MD: 258 net new home sales during April 2008 with a median minimum price of $549,000

Sacramento, CA: 550 net new home sales during April 2008 with a median minimum price of $359,950

Rockford, IL: 11 net new home sales during April 2008 with a median minimum price of $199,990

Orange County, CA: 163 net new home sales during April 2008 with a median minimum price of $739,500

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