In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses mortgage purchase applications and retail sales.

• A notably higher number of people submitted mortgage applications for home purchases in the past week.  A big weekly gain of 13 percent (after adjusting for the usual seasonal factors) looks to show a breakout from the low levels of the past two years.  Prior to today’s data this mortgage data was suspect because it did not match up with the recovery in home sales figures.  But now, the mortgage data is clearly pointing to rising home sales.  Let’s hope that cash deals, which are not in the mortgage data, are not falling just as mortgage activity is beginning to show a marked improvement.
• Refinancing activity also rose as mortgage rates continue to remain at incredibly low levels (partly thanks to the Euro crisis), with each refinancing probably lowering a mortgage bill by $150 to $300 each month.
• In separate economic news, retail sales retreated, possibly signaling a decelerating economy.  But one big part of the decline was due to people not having to fork over so much at gas stations as the prices at the pump fell.  Sales at furniture and home furnishing stores continue to show consistent recovery, rising 9 percent from one year ago, no doubt helped by rising home sales.  Sales at men’s clothing stores rose in May while sales at women’s clothing stores fell.  Still, parents with teenage daughters need to be mindful that sales are about five times higher at women’s stores compared to men’s.
• Finally, a plunge in producer prices suggests broadly retreating inflation.  It costs 8 percent less compared to last year to buy crude producer items and 0.5 percent less to buy products at intermediate stages of production.  However, consumer price data, which comes out tomorrow, will not show a comparable retreat simply because the biggest weight to consumer prices is the rent component and this has been rising because of tightening apartment vacancy trends.  Therefore, next year’s cost of living adjustment on social security checks, for instance, will be around 2 to 3 percent.

The below picture is from yesterday’s front page of the Wall Street Journal. The €500 euro note is a lot of money, equivalent to $625 in U.S. currency at today’s exchange rate. The pictured woman in Spain is protesting against the bank bailout. Visibly showing such a large denominated note in a crowded place carries risk. Good thing that the note is a fake.

Picture via The Wall Street Journal

It is unheard of in America for someone to display anything larger than a $100 bill. But the $625 equivalent amount inherent in the €500 has been actively promoted since its creation and it is not uncommon to see such a large note getting passed around in Europe, even among American tourists.

One of the goals of the euro was to dethrone the U.S. dollar as the world’s reserve currency and achieve the status of a global currency. There are probably more U.S. dollars floating around outside the U.S. than here in the U.S. Think of Russians saving their money not in rubles but in U.S. dollars, carrying the recent memory of when the old ruble totally collapsed and wiped away years of savings just a few years ago. People in Argentina also have a good memory of a lifetime of peso savings turning into dust overnight. In U.S. history, those in the antebellum South would also have experienced the sudden worthlessness of the “greyback” after the Civil War. The fear of currency collapse is why people in Iran today smuggle and save their money in U.S. dollars as they do not trust their government. The same thing is likely occurring in Venezuela.

The mere idea that the printing of paper (the U.S. dollar) has value gives America an extraordinary privilege over other countries. Imagine how you would feel if you had the printer could just spit out few hundred dollar bills every now and then that carry real purchasing power. That is just the feeling and the privilege that the U.S. government with the Federal Reserve holds. America can print and print, and use the money to buy things without worrying too much about inflation and the loss of value.

From the launch of the euro, it looked as if the euro could indeed push aside the dollar. The euro greatly strengthened against the dollar from 2001 to 2008. By circulating the €500 note as a common occurrence, it was hoped that Russians would rather have fewer euro note than a large number of dollars, particularly as the euro was appreciating in value. Criminals could also perhaps switch over to the big euro note, necessitating a thinner and lighter suitcase full of money. Interestingly though the drug dealers, illegal arms traders, and Somali pirates have consistently demanded only dollars as payment and not euros. Perhaps they understood the difficulty and the suspicions that would be raised in exchanging such a huge euro note for everyday use in countries outside of Euro Zone.

Irrespective of initial goals, the euro simply cannot be sustained if there are countries like Greece unwilling to live within their financial resources. The current euro problem has therefore by default resulted in the U.S. dollar getting stronger. That is why the U.S. government can borrow at exceptionally cheap interest rates and why U.S. mortgage rates are at unbelievably low levels (for those who qualify).

The only challenge to the dollar, though not anytime soon or even within a decade, is the Chinese Yuan. All metrics suggests the yuan will strengthen against the dollar on a sustained basis because it does not carry a large budget deficit and has a sizable trade surplus. If Iranians, Russians, and the outlaws truly begin to believe that this will be the case in future than the dollar could be dethroned. U.S. interest rates and mortgage rates will then be much higher.

• Investors accounted for 20 percent of total residential sales in April, down from 23 percent in February and 21 percent in March according to the Realtors® Confidence Index. Investors have reported that in many cases they can obtain a positive cash flow converting properties to rental units, or obtain a resale after making improvements.
• Realtors® have been reporting that the market is able to absorb the large number of distressed properties coming onto the market. In some regions Realtors® report that the market would clear additional properties if available. Approximately 68 percent of investors pay cash.
• Additional information on a variety of topics related to current residential market conditions may be found here.

Is your business currently using social media? Because if it isn’t, then it really is time that you did something about it and got in the race – because social media really is the future of the web.

Social media basically encompasses things like Facebook, Twitter and Flickr – they are online services that allow people to communicate, network and ‘connect’ and this way help the flow of communication while at the same time providing some perfect avenues for promoting your business.

However at the same time social media is also more than just connecting with people and marketing – it is also about improving internal communications in businesses and lowering ‘communications overheads’. It can be used to work on collaborative projects, to hire staff and even to create whole new business models like Groupon.

And it’s growing. Fast. Meaning that it’s very much time that you got on the express train. Here are some facts about social media, and why it’s important for you to get involved.

Did You Know…

• 19 million people a day use social networks and social games
• On average they spend 22 minutes each day on these services
• 17% of married couples since 2006 met on online dating sites
• If Facebook was a country and its users made up all of the population, then it would be the 3rd largest country in the entire world just behind China and Russia
• In fact there are more users on Facebook than there are cars in the world (roughly 750 million cars – I’d have thought there’d be more too)
• In July 2011 Twitter had over 150 million unique visitors
• One in every seven minutes that we spend online is spend on Facebook
• Facebook has been seen by at least 55% of the population of Earth
• On Facebook there are 510,000 comments posts every 60 seconds
• 56% of businesses used social networking in 2011 which is up from 56% in 2008
• 1 in 3 small businesses have some kind of presence on social media sites
• On Facebook a whopping 3,500,000,000 items are shared each week
• 56% of consumers are more likely to recommend a brand if they are a fan on Facebook
• 34% of marketers have managed to generate a lead through Twitter
• 29% of Twitter users follow some kind of brand compared to 58% of Facebook users who ‘like’ a brand (and interestingly this includes more women than men on both counts)
• 54% of people who shop on their mobiles have used an AR code
• And 83% of those customers have gone on to scan more codes in the future

What companies also need to be aware of is that Google is now introducing social media as a crucial aspect of its search. This means that you can improve the visibility of your site on Google by using Facebook as a way to get natural inbound links, but that you should also look into using Google’s own social media attempt Google+ which you can now use to promote your site online also, and which you can use to add more information to your listings in the SERPs.

And generally it’s crucial that you look at using all of the social utilities available to you in order to promote your individual pages and articles, but also to connect with potential clients and business partners and to generally market yourself and reach a wider audience. And with search engine rankings being less stable than ever, it is very important now for businesses to look into other avenues for marketing their businesses and generating traffic. As these facts prove social media is big, and it’s only going to get bigger. If you don’t start soon, then you will risk being left behind entirely