Not for Sale: August 21 – 25

Home sales faltered as buyers had few choices. Here are the five things we learned from U.S. economic data released during the week ending August 25.

A dearth of inventory chokes previously owned home sales. Existing home sales dropped 2.2 percent to a seasonally adjusted annualized rate (SAAR) of 4.070 million units, a 13-year low. Sales have fallen 16.6 percent over the past year. The National Association of Realtors measure dropped in three of four Census regions, with only the West enjoying a sales gain. A mere 1.110 million homes were available for sale, up 3.7 percent for the month, off 14.1 percent from a year, and translating into a 3.3 month supply. The median sales price of $406,700 was up 1.9 percent from a year earlier. The press release blamed slowing sales on inventories and interest rates, noting that “both have been unfavorable to buyers.” 

Meanwhile, there was some momentum with new homes. The Census Bureau estimates new single-family home sales grew 4.4 percent in July to a seasonally adjusted annualized rate (SAAR) of 714,000 units. Sales were a startling 31.5 percent ahead of their year-ago pace. Sales surged in the Midwest and West but declined in the South and Northeast during the month. The inventory of homes increased 2.1 percent to 437,000 homes, or a 7.3-month supply. The mix of homes continued to shift to more affordable units. The median sales price of $436,700 was down 8.7 percent from a year earlier. 

The rise in consumer sentiment paused in August. The University of Michigan’s Index of Consumer Sentiment lost 2.1 points to a seasonally adjusted 69.5 (1966Q1=100). Even with the drop, the index was 11.3 points above its year-ago mark. The current conditions index slipped 9/10^ths of a point to 75.7 (August 2022: 58.6), while the expectations measure shed 2.8 points to 65.5 (August 2022: 58.0). Consumers anticipate prices will rise 3.5 percent over the next 12 months and have long-term inflation expectations of 3.5 percent. The press release noted that consumers were “tentative about the outlook ahead.”

Economic activity accelerated in July. The Chicago Fed National Activity Index (CFNAI) jumped 45 basis points to +0.12, its best reading since January. A positive CFNAI indicates that the U.S. economy is growing faster than its historical average. Forty-five of the CFNAI’s 85 components made positive contributions to the index, with the remaining 40 measures pulling down the measure. Among the four major component categories, those related to production (+0.18) and personal consumption/housing (+0.02) made positive contributions. Drags on the economy, albeit by small amounts, were sales/orders/inventories (-0.05) and employment (-0.02) indicators. The CFNAI’s three-month moving average improved by two basis points to -0.13, signaling below average growth. 

Core durable goods orders edged up in July. The Census Bureau reports new orders for manufactured durable goods plummeted 5.2 percent to a seasonally adjusted $285.9 billion. Much of the decline resulted from the 14.3 percent freefall in transportation goods orders, with huge decreases for civilian and defense aircraft. Net of transportation goods, core durables orders increased 0.5 percent to $187.2 billion. Rising were orders for machinery (+1.1 percent), electrical equipment/appliances (+1.0 percent), fabricated metals (+0.7 percent), and primary metals (+0.1 percent). Civilian nonaircraft capital goods orders inched up 0.1 percent. Durable goods shipments held steady at $283.6 billion. Unfilled orders swelled 0.5 percent to $1.332 trillion and inventories remained at $522.2 billion. 

Other U.S. economic data released over the past week:

• Jobless Claims (Week ending August 19, 2023, First-Time Claims, seasonally adjusted): 230,000, -10,000 vs. the previous week, +22,000 vs. the same week a year earlier). 4-week moving average: 236,750 (+11.0% vs. the same week a year earlier). 

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