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Monday Morning Cup of Coffee: FOMC and jobs numbers will dominate

Key housing indicators also on tap for the week

April 27, 2014

Monday Morning Cup of Coffee takes a look at news crossing HousingWire's weekend desk, with more coverage to come on bigger issues.

Economic news will likely dominate this week, with the Federal Open Market Committee meeting on Tuesday and Wednesday, and the April jobs report due Friday. Observers will be looking for the FOMC's take on the three questions Fed Chair Janet Yellen outlined in a speech at the Economic Club in New York on April 16. Specifically:

  • Is there still significant slack in the labor market?
  • Is inflation moving back to 2%? 
  • What factors may push recovery off track?

CNNMoney thinks investors will look for clues on "when Yellen and Co. might embark on their first interest rate hike, a thought that has spooked some on Wall Street. The Fed may also hint at whether it believes the recent uptick in economic data will persist. A brightened outlook could signal the central bank will continue, if not accelerate, its exit of quantitative easing." 

Yellen's question about the labor market may be answered by the jobs report, with analysts expecting a drop in unemployment to 6.6% for the month, after an unchanged 6.7% unemployment rate reported for March.

The Pending Homes Sales report comes out Monday, followed by the S&P/Case-Shiller Home Price Index on Tuesday, giving markets a clearer picture on the real state of housing. But are rising home prices really something to cheer about? These two economists think not, and question the ability of the housing economy to lift the larger U.S. economy in any case.

As we reported last week, the fastest-moving housing markets in the country are in California — Oakland, San Jose, and San Francisco — where less than one third of homes on the market two months ago were still for sale in mid-April 2014. Not surprisingly, the state also has eight of the most expensive cities in the country to buy a home.

But with more than 30% of homes bought by investors last year, many in all cash, what does the pullback of those same investors mean for California and the homeowners there who are still underwater? The short answer is probably not good, concluded a Sunday  article by Dr. Housing Bubble.

"Some thought that once investors pulled back that regular buyers would step into the fold with massive incomes to purchase these high priced shacks. That simply isn’t happening. Inventory is building up across markets in the state," the article says.

Reforming the banking system in the wake of the financial crisis has birthed some interesting arguments, including one that calls for the elimination of banks as they operate now, shifting the responsibility of creating money to the government. Business Insider has an interesting piece on the subject, tracing the history of the argument and explaining it from both side.  

The Federal Deposit Insurance Corp. reported one bank closing for the week ending April 25, 2014 — Allendale County Bank in Fairfax, South Carolina, acquired by Palmetto State Bank.

That brings the total number of failed banks in 2014 to six.

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