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INFO THAT HITS US WHERE WE LIVE… Last week gave us more evidence that this housing recovery, though growing slowly, will in fact endure. According to a major online real estate portal, listing inventory rose 3.5% from January to March. This beat the gains going into the 2012 Spring selling season, although inventories are still 15% off last year’s levels, with only nine of 146 metros showing annual increases. Not surprisingly, the median age of inventory in March dipped to 78 days, down 12.3% from last year, and median asking prices were up 0.5% from February, gaining in 29 of the top 30 metro areas.

According to a housing consultancy, land values are up 13% on average over last year, their first annual rise since 2005. The increasing demand from builders for finished lots is driving the gain, as the rate of new home construction is up 27.7% the past year. Higher land values will mean higher prices for new homes, as land cost makes up 21.7% of the final sale price, according to the National Association of Home Builders. Finally, a first quarter survey of lenders reported that 71% are more confident about home prices, believing they’re rising at a “sustainable pace.”

BUSINESS TIP OF THE WEEK… More time savers: 1) write down agendas and time limits for phone calls and meetings; 2) group errands, hitting the post office, bank, and gas station in one trip, not three; 3) do more shopping online; 4) don’t try to be 100% perfect when 95% will do.

>> Review of Last Week

UP DOWN UP… An interesting week on Wall Street. Investors spent the first four days trading stocks UP, as the S&P 500 hit record closing highs two days in a row. An absence of news and market-moving economic data kept global equity markets on the ascent. Then came Friday, when the release of some disappointing consumer data sent stock prices back DOWN. Although investor optimism prevailed and prices recovered a bit during the day, all three major market indexes slipped, but still ended UP solidly for the week.

Friday’s unfortunate reads on the consumer included Retail Sales down 0.4% for March, way lower than expected, after being up 1.1% the month before. This was followed by Michigan Consumer Sentiment coming in with its lowest reading in nine months. Better news included Initial Unemployment Claims down by 42,000, to 346,000, and Continuing Claims 12,000 lower, at 3.08 million. Finally, the Producer Price Index (PPI) dipped 0.6% in March, indicating inflation at the wholesale price level remains within acceptable limits.

The week ended with the Dow up 2.1%, to 14865; the S&P 500 up 2.3%, to 1589; and the Nasdaq up 2.8%, to 3295.

Bond buying was strong on Friday as the weak consumer data sent investors seeking a safe haven. This, however, was not quite enough to reverse the losses suffered earlier in the week when stocks soared. The FNMA 3.5% bond we watch ended the week down .05, at $106.08. Thanks to the disappointing March jobs report, average fixed mortgage rates dipped for the second week in a row in Freddie Mac’s Primary Mortgage Market Survey. Purchase loan applications were down 1% for the week but up 4% from a year ago, according to the Mortgage Bankers Association.

DID YOU KNOW?… To create an income tax, the Constitution had to be changed because federal taxes could only be based on state population. In 1913, the 16th Amendment eliminated this and the federal government quickly passed its first income tax law.

>> This Week’s Forecast

HOME BUILDERS FEELING GOOD, MANUFACTURING MIXED, INFLATION TAME… A well-rounded view of the economy this week should show the housing recovery on track, as home builders actively fill their pipelines with new homes. Tuesday’s March Housing Starts should be up, with Building Permits extending the good feelings a few months more.

But manufacturing messages remain mixed, the New York Empire Index down and the Philadelphia Fed Index up, although both are now positive, indicating expansion. The Consumer Price Index (CPI) and Core CPI, excluding food and energy, are forecast virtually flat for March, a good thing. As long as inflation is tame, the Fed won’t think about raising the Funds Rate.

>> 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 Apr 15 – Apr 19

>> Federal Reserve Watch

Forecasting Federal Reserve policy changes in coming months… Economists expect no change in the Funds Rate any time soon. Inflation is mild and the unemployment rate remains far from the Fed’s target. 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%

Probability of change from current policy: