Home Sales Chilled (Again) in January: February 18 – 22

Home sales faltered again in early 2019. Here are the five things we learned from U.S. economic data released during the week ending February 22.  

#1Sales of previously owned homes fell for the ninth time in ten months in January. The National Association of Realtors’ estimate of existing home sales dropped 1.2 percent during the month to a seasonally adjusted annualized rate (SAAR) of 4.94 million units. This left the count of transactions 8.5 percent below that of a year earlier to its lowest point since November 2015. Sales fell in three of four Census regions: West (-2.9 percent), Midwest (-2.5 percent), and South (-1.0 percent). Only the Northeast enjoyed a sales increase during the month (+2.9 percent). While still tight, the number of homes on the market rose 3.9 percent to 1.59 million units (+4.6 percent vs. January 2018), the equivalent to a 3.9 month supply. The median sales price of $247,500 represented a 2.8 percent increase from January 2018. The press release states NAR’s belief that home sales “have reached a cyclical low.”

#2Meanwhile, homebuilders’ sentiment rebounded in February. The Housing Market Index (HMI) from the National Association of Homebuilders added four points during the month to a seasonally adjusted 62. The HMI has been above a reading of 50—meaning a higher percentage of homebuilders view the housing market as “good” rather than “poor”—for 56 straight months. The HMI improved in the Midwest (55) and South (66) but lost traction in the Northeast (45) and West (67). Also moving forward in February were indices for sales of single-family homes (up three points to 67), expected sales over the next six months (up five points to 68), and traffic of prospective buyers (up four points to 48). The press release stated that “many builders are reporting positive expectations for the spring selling season.

#3Forward-looking economic indicators slipped in January. The Conference Board’s Leading Economic Index (LEI) lost 1/10th of a point to a 111.3 (2016=100), as the measure has stayed within 1/10th of a point range over the past four months. Even with the recent stagnation, the LEI has risen 3.5 percent over the past year. The coincident economic index added 1/10th of a point, placing it 2.3 percent ahead of its year-ago mark. The lagging economic index grew by a half point to 106.7. The measure has risen 2.6 percent since January 2018. The Conference Board, in noting that the LEI “has now been flat essentially since October 2018, indicates economic growth “will likely decelerate to about 2 percent by the end of 2019.” (The press release also noted that the recently ended partial federal government shutdown resulted in three of the ten components to the LEI being unavailable for analysis).

#4Durable goods orders expanded in December. The Census Bureau estimates new orders for manufactured durable goods totaled $254.4 billion, up 1.2 percent for the month. As normal, aircraft orders were a major driver to the headline number—a 28.4 percent increase in orders for civilian aircraft resulted in a 3.3 percent gain in transportation goods (motor vehicle orders increased 2.1 percent). Net of transportation goods, core durable goods orders inched up by a mere 0.1 percent. Losing ground in December were orders for computers/electronics (-8.3 percent), communications equipment (-5.0 percent), machinery (-0.4 percent), and electrical equipment/appliances (-0.1 percent). Rising during the month were orders for fabricated metal products (+0.3 percent). Orders for civilian capital goods net of aircraft—a proxy of business investment—fell 0.7 percent during the month.

#5Agricultural prices grew in December. The Department of Agriculture reports that its index for prices received by farmers grew by 1.8 percent during the month to a reading of 89.9 (2011=100). Despite the increase during the month, the measure remained 2.4 percent below its year-ago mark. Crop prices jumped 4.2 percent, led by higher prices for vegetables/melons, feed grains, and grains/oilseed. Livestock prices slipped 0.4 percent in December, with dairy prices slumping 3.5 percent but poultry/egg prices surging 3.4 percent.

Other U.S. economic data released over the past week:Jobless Claims (week ending February 16, 2019, First-Time Claims, seasonally adjusted): 216,000 (-23,000 vs. previous week; -2,000 vs. the same week a year earlier). 4-week moving average: 235,750 (+3.7% vs. the same week a year earlier)- FOMC Minutes

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

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