Alongside the
irises, daffodils, tulips, and other perennials that were popping up (in
seasonal parts of the United States) last week, there was a lot of talk about
the housing market and what its performance means about the state of the
economy. Perceptions varied.
The U.S. housing market
has showed improvement in recent years; however, sales slowed during 2013 as
interest rates and home prices moved higher. Last week’s housing data showed
sales of existing homes were up 1.3 percent for April which was lower than
expected, but sales of new single-family homes were up more than expected. In
addition, the S&P/Case-Shiller 20-City Composite Home Price Index showed February
housing prices had reached levels last seen in 2004.
According to MarketWatch.com, some big-name investors
are worried about the housing market’s recovery because younger investors are
not inclined to take on mortgage debt. Others suggest homeownership may drop
because people are marrying later. Balancing the naysayers are pundits who
believe demand for housing will continue to strengthen. Finally, the minutes of
the Federal Open Market Committee, which were released last week, showed the
Fed recognized recovery in the housing sector remained slow, but expects
economic activity to expand at a moderate pace:
“Most
participants commented on the continuing weakness in housing activity. They saw
a range of factors affecting the housing market including higher home prices,
construction bottlenecks stemming from a scarcity of labor and harsh winter
weather, input cost pressures, or a shortage in the supply of available lots.
Views varied regarding the outlook for the multifamily sector, with the large
increase in multifamily units coming to market potentially putting downward
pressure on prices and rents, but the demand for this type of housing [is] expected
to rise as the population ages. A couple of participants noted mortgage credit
availability remained constrained and lending standards were tight compared
with historical norms, especially for purchase mortgages.”
What are we to
make of the conflicting opinions? The housing market is considered to be a
leading economic indicator. This means it tends to change direction before the
economy changes direction and offers some indication about where the economy
may be headed. (It should be noted housing data generally is several months old
before it is reported.) Housing is not the only leading indicator. The Conference Board tracks an index of
leading economic indicators. For April, its Leading Economic Index® showed
improvement for a third consecutive month. It’s a reminder of how important it
is to pay attention to the big picture.
the newest european import is the chip and pin card. Discussions about
credit and debit card security were heating up even before retailers
experienced data breaches last winter. Needless to say, after the breaches and a
wealth of media reports touting the fact that Europe, Canada, and most of the
rest of the world already have more secure payment systems than the one we use
in the United States, interest in replacing our current system increased.
Eighty
countries around the world are currently implementing Europay, MasterCard and
Visa, or EMV™ technology. In some places, EMV compliance is further along than
it is in others. For instance, about 95 percent of point-of-sale credit card
machines (aka terminals) in Europe are EMV compliant; 79 percent of terminals
in Canada, Latin America, and the Caribbean; 77 percent of terminals in Africa
and the Middle East; and 51 percent of terminals in the Asia Pacific region.
Why
is a card with a chip and pin better than a card with a magnetic stripe and a
signature? One of the primary reasons, according to Forbes, is improved security:
“Most credit cards in the United States
operate with a simple magnetic stripe that can be captured and copied
relatively easily. Much of the rest of the world uses a small chip on the
credit card to validate with a transaction. The chip employs cryptography and a
range of other security features and measures that create a multi-layered
defense against card fraud. When combined with a Personal Identification Number
or PIN code (the sort used on ATM cards), it substantially raises security.
Even with just a signature it makes a marked improvement over a simple magnetic
stripe.”
The United States, until recently, was
the last major market holdout. However, according to current estimates, 60
percent of merchants will have EMV compliant devices by 2015. Check your mail.
A new card may be on its way soon.
Weekly Focus – Think About It
“Kindness is the
language which the deaf can hear and the blind can see.”
--Mark Twain, American writer and
humorist
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