Record Existing Home Sales, Strengthening Business Activity: What We Learned During the Week of July 20-24

Sales of previously owned homes hit an 8-year high and several measures find business activity growing.  Here’s the U.S. economic data you missed during the week ending July 24.

1. Sales of previously owned homes grew in June to their fastest pace since before the last recession. The National Association of Realtors measure jumped 3.2% during the month to a seasonally adjusted annualized rate (SAAR) of 5.49 million units. This was 9.6% above the year ago pace and the fastest rate of existing home sales since February 2007. Sales grew during the month and on a year-to-year basis in all 4 Census regions, with double digit 12-month percentage gains in both the Midwest and Northeast. The inventory of unsold homes remained tight, growing only 0.4% from a year earlier to 2.30 million units. This translated into a 5.0 month supply (June 2014: 5.5 month supply). As a result, the median sales price of previously owned homes–$236,000–was 6.5% above year ago levels and exceeded the previous all-time high for homes prices achieved back in July 2006. NAR attributes the “wave of demand” to “steady job growth and an improving economy that’s giving more households the financial wherewithal and incentive to buy.”
2. Meanwhile, new home sales dropped during the same month to its slowest pace of the year. The Census Bureau estimates sales of newly constructed homes fell 6.8% during June to 482,000 units (SAAR). Sales fell in 3 of 4 Census regions, including double digit percentage drops in the West and Midwest. Even with the drop, new home sales were up 18.1% from a year earlier, with positive year-to-year comparables in all 4 Census regions. Inventories eased a bit during the month—there was a 5.4 month supply of new homes available for sale at the end of June, up from 4.8 months in May and below the 6.1 month supply of a year earlier. Interestingly, the sales data contrasts with positive reports on both housing starts and homebuilder sentiment reported here last week.
3. The Federal Reserve Bank of Chicago detects economic activity picking up during June. The Chicago Fed National Activity Index (CFNAI), a weighted index of 85 economic indicators, added 16-basis points to a reading of +0.08. This was the 1^st time the CFNAI has been positive in 2015. The CFNAI’s 3-month moving average improved by 6-basis points to a near-neutral reading of -0.01, its best mark since January. A 3-month moving average at 0.00 is consistent with the U.S. economy growing at its normal historic rate. 48 of the 85-tracked economic indicators made a positive contribution to the CFNAI, with indices associated with production/income, employment and sales/orders/inventories improving from May.
4. A forward looking economic measure suggests a strengthening business activity during the 2^nd half of 2015. The Conference Board’s Leading Economic Index gained 7/10^ths of a point to 123.6 (2010 = 100). 6 of 10 components made positive contributions to the leading index, led by the interest rate spread, building permits and consumer expectations on business conditions. The coincident index inched up 2/10^ths of a point to 112.5, boosted by positive contributions from all 4 index components. The lagging index added 8/10^ths of a point to 117.6, with 4 of 7 index components making positive contributions. The press release noted that the LEI was gaining “more momentum with another large increase in June pointing to continued strength in the economic outlook for the remainder of the year.”
5. Layoff activity slowed even more in mid-July. The Department of Labor reports that the number of 1^st time claims made for unemployment insurance benefits fell by 26,000 during the week July 18 to a seasonally adjusted 255,000. The 4-week moving average dropped by 4,000 to 278,500—the moving average from a year earlier was at 303,000. One should be cautious in reading too much into single week variations as the data series is quite volatile week-to-week and this drop may be tied to seasonal adjustments not accurately picking up the timing of scheduled model changeover auto plant retooling shutdowns. But even if the count of jobless claims rises in the coming weeks, it is clear that layoff activity has remained relatively muted this summer.

Other data released over the past week that you might find of interest:
– FHFA House Price Index (May 2015):  +0.4% vs. April 2015, +5.6% vs. May 2014.
– Regional & State Employment (June 2015): Nonfarm payrolls expanded in 31 states.

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