Home Sales and Durable Goods Orders Take Steps Backward: August 20 – 24

Home sales continued to mellow this summer. Here are the five things we learned from U.S. economic data released during the week ending August 24.

#1Existing home sales slipped for a fourth consecutive month in July. The National Association of Realtors reports that sales of previously owned homes inched down 0.7 percent during the month to a seasonally adjusted annualized rate (SAAR) of 5.34 million units, its slowest sales pace since February 2016. During the four-month losing streak, home sales have declined 4.6 percent. Sales dropped during July in three of four Census regions: Northeast (-8.3 percent), Midwest, (-1.6 percent), and South (-0.4 percent). Sales gained 4.4 percent in West. Sales were 1.5 percent below that of a year earlier, with negative 12-month comparables in all four Census regions. The number of homes available for sale held relatively stable versus both June and a year earlier at 1.92 million units, the equivalent to a tight 4.3 month supply. The median sales price of $269,600 represented a 4.5 percent increase from a year earlier. The press release stressed that the supply of homes is “still not at a healthy level, and new home construction is not keeping up to meet demand.”Existing and New Home Sales July 2018 082418

#2New homes slumped for a second straight month. The Census Bureau estimates new home sales were at a seasonally adjusted annualized rate (SAAR) of 627,000 units during July, down 1.7 percent from June but still 12.7 percent ahead of the July 2017 sales pace. New home sales improved in the West (+10.9 percent) and Midwest (+9.9 percent) but fell in the Northeast (-52.3 percent) and South (-3.3 percent). There were 309,000 new homes available for sale at the end of July (+2.0 percent versus June 2018 and +12.0 percent versus July 2017), the equivalent to a 5.9 month supply. The median sales price of $328,700 was up 1.8 percent from a year earlier.

#3Volatility in aircraft purchasing led to a slowdown in durable goods orders. New orders for durable manufactured goods slumped 1.7 percent to a seasonally adjusted $246.9 billion, per the Census Bureau. Transportation goods orders fell 5.3 percent thanks to huge drops in orders for both civilian (-35.4 percent) and defense (-34.6 percent) aircraft (orders of both tend to swing widely month-to-month). Motor vehicle orders gained 3.5 percent. Orders for durable goods other than transportation orders grew 0.2 percent, with increases for computers/electronics (+1.1 percent), machinery (+0.6 percent), and primary metals (+0.3 percent). Electrical equipment/appliances orders slipped 0.2 percent. New orders for civilian capital goods net of aircraft—a measure of business investment—jumped 1.4 percent. Durable goods shipments slipped 0.2 percent during the month to $250.8 billion, with the measure gaining 0.6 percent after removing the shipments of transportation goods.

#4Employers laid off relatively few workers during the late summer. There were 210,000 first-time claims made for unemployment insurance benefits during the week ending August 18, down 2,000 claims from the week earlier and 27,000 claims from the same week a year ago. Only twice has the Department of Labor’s estimate of initial jobless claims been this low since 1969—and both times have been within the past four months. The four-week moving average of first-time claims dropped to 213,750, down 10.8 percent from a year earlier and (also) just above its 49-year low. 1.704 million people (not seasonally adjusted) were receiving some form of unemployment insurance benefits during the week ending August 4, down 11.3 percent from a year earlier

#5House prices grew at a slower rate in June. The Federal Housing Finance Agency (FHFA) indicates that its purchase-only House Price Index (HPI) grew 0.2 percent on a seasonally adjusted basis during the month. (This measure tracks sales prices of homes purchased using mortgages that were sold to or guaranteed by Fannie Mae and Freddie Mac.) The HPI increased in seven of nine Census regions, led by a 0.7 percent gain in the Mountain region, a 0.6 percent rise in the East North Central region, and a 0.5 percent bump in the Middle Atlantic. Prices declined 0.4 percent in both New England and the South Atlantic. Home prices have risen 6.5 percent over the past year, with positive 12-month comparables in all nine Census regions. The largest year-to-year percentage price gains were in the Mountain (+9.6 percent), Pacific (+7.0 percent) and South Atlantic (+6.7 percent) regions.

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

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

Tight Inventories, Rising Materials Prices Weigh on Housing: June 18 – 22

Tight inventories continued to hold back the housing market during the spring. Here are the five things we learned from U.S. economic data released during the week ending June 22.

#1Existing home sales stagnated during May. Sales of previously owned homes slipped 0.4 percent during the month to a seasonally adjusted annualized rate (SAAR) of 5.430 million homes. This left the National Association of Realtors’ home sales measure down 3.0 percent from May 2017 levels. Sales grew during the month on in the Northeast (+4.6 percent) while activity fell in three of four regions versus the previous year (Sales held steady versus May 2017 levels in the South). While still very tight, the number of homes on the market grew 2.8 percent during the month to 1.85 million units. This was nevertheless 6.1 percent below the year-ago level of inventories and the equivalent to a 4.1 month supply. As a result, the median sales price for existing homes has grown 4.9 percent over the past year to $264,800. The press release notes that “[i]ncredibly low supply continues to be the primary impediment to more sales.”Existing Home Sales June 2018-062218

#2Activity in the Midwest drives a rise in housing starts. The Census Bureau reports that housing starts grew 5.0 percent during May to a seasonally adjusted annualized rate (SAAR) of 1.350 million homes. This was 20.3 percent ahead of the year-ago pace of starts. Single-family home starts grew 3.9 percent during the month to an annualized 936,000 (+18.3 percent versus May 2017) while multifamily units starts jumped 11.3 percent to an annualized 404,000 units (+27.4 percent versus May 2017). Only one region—the Midwest—enjoyed a month-to-month increase in starts. Looking toward the future, the number of issued housing permits of 1.364 million (SAAR), which was off 4.6 percent for the month but still 8.0 percent ahead of the year-ago rate. The annualized rate of housing completions grew 1.9 percent during May to 1.291 million homes. This was up 10.4 percent from the same month a year earlier. 

#3Higher raw material prices weigh on homebuilder sentiment. The National Association of Home Builders’ Housing Market Index (HMI) lost two points in June to a seasonally adjusted reading of 68. Even with the modest drop, the HMI has been above a reading of 50—where a higher percentage of homebuilders see the housing market as “good” than view it as “poor”—for 48 straight months. During the month, the HMI improved in the Northeast and West but lost ground in the Midwest and South. Indicies for both current (75) and expected sales (76) each lost a point, as did the measure tracking prospective buyers traffic (50). The press release stressed that builders remained optimistic, but also they were “increasingly concerned that tariffs placed on Canadian lumber and other imported products are hurting housing affordability.”

#4Economic indicators suggest continued economic growth for the remainder of the year. The Conference Board’s Leading Economic Index added 2/10ths of a point in May to a seasonally adjusted reading of 109.5 (2016=100). The measure has grown 6.1 percent over the past year. Seven of the LEI’s ten components made positive contributions during the month, led by new manufacturing orders, the interest rate spread, and consumers’ expectations for business conditions. The coincident index also increased by 2/10ths of a point during May with the 103.7 reading representing a 2.2 percent gain from a year earlier. Three of four coincident index components made positive contributions: nonfarm payrolls, personal income net of transfer payments, and manufacturing & trade sales. The lagging index added a half point to a reading of 105.2 (+2.7 percent versus May 2017). The press release noted that while economic growth would remain “solid,” May’s smaller increase suggests that “economic activity is not likely to accelerate.”

#5Layoff activity remained slow in mid-June. There were a seasonally adjusted 218,000 first-time claims made for unemployment insurance benefits during the week ending June 16, down 3,000 from the prior week and 26,000 for the same week a year earlier. The Department of Labor’s jobless claims data can be volatile week-to-week, so analysts frequently look at four-week moving data to spots trends. But the story is much the same—the moving average was at 221,000, which was 10.0 percent below that of a year earlier. Further, the four-week moving average has been below 300,000 for an impressive 172 consecutive weeks.

Other U.S. economic data released over the past week:
FHFA House Price Index (April 2018, Purchase-Only Index, seasonally adjusted):  +0.1% vs. March 2018, +6.4% vs. April 2017. 

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

Tight Inventory Chokes the Housing Market: February 19 – 23

Existing home sales slowed for a second straight month, but overall business activity remains stout. Here are the five things we learned from U.S. economic data released during the week ending February 23. (OK, there are only four things, as it was a slow week)

#1A lack of homes for sale depressed the real estate market in January. The National Association of Realtors reports that sales of previously owned homes declined 3.2 percent during the month to a seasonally adjusted annualized rate (SAAR) of 5.38 million units. This left the sales pace 4.8 percent below that of January 2017, the largest year-to-year decline in existing home sales since the summer of 2014. Sales slowed in all four Census regions on both a month-to-month and year-to-year basis. Sales were down for the month by 6.0 percent in the Midwest, 5.0 percent in the West, 1.4 percent in the Northeast, and 1.3 percent in the South. Inventories, while growing a bit during the month, remained very tight. There were 1.52 million homes available for sale at the end of January (representing a mere 3.4 month supply of homes), up 4.1 percent for the month but still 9.5 percent smaller than year ago inventories levels. As a result, the median sales price of $240,500 was 5.8 percent above that of a year earlier. The press release lays blame on the “utter lack of sufficient housing supply and its influence on higher home prices” for the decrease in sales activity.

#2Forward-looking economic indicators suggest healthy economic growth during (at least) the first half of 2018. The Conference Board’s Leading Economic Index (LEI) grew by 1.1 points during January to a seasonally adjusted 108.1 (2016=100). The LEI has grown by 6.2 percent over the past year. Eight of the ten LEI components made a positive contribution to the index, led by building permits, new orders for manufactured goods and stock prices. The coincident index inched up by 1/10th of a point to 103.0 and up 2.2 percent over the past year. Three of the four coincident index components made positive contributions: nonfarm payrolls, personal income net of transfer payments, and manufacturing/trade sales. The lagging index also added 1/10th of a point to 104.0 (+2.5 percent versus January 2017), with three of seven components making positive contributions: prices for services, consumer debt as a percentage of personal income, and the prime rate charged by banks. The press release noted that LEI data point to “with widespread strengths coming from financial conditions, manufacturing, residential construction, and labor markets.”

#3Jobless claims decades remained near multi-decade lows. First-time claims made for unemployment insurance benefits dropped by 7,000 during the week ending February 17 to a seasonally adjusted 222,000, down 25,000 from the same week a year ago. The Department of Labor reports four-week moving average declined by 2,250 during the week to 226,000, down 7.9 percent from a year earlier. Except for the reading two weeks earlier, this was the lowest point for the moving average of first-time jobless claims since March 1973. 2,360,760 people were receiving some form of unemployment insurance benefits during the week ending February 3, 5.9 percent below the count during the same week a year earlier.Jobless Claims 1970-2018 022318

#4Inventories of crude oil, gasoline, and distillates are much smaller than they were a year ago. The Energy Information Administration finds commercial crude oil inventories, which does not include the oil held in the Strategic Petroleum Reserve, declined by 1.6 million barrels during the week of February 16 to 420.5 billion barrels. This was 18.9 percent smaller than crude oil inventories during the same week a year earlier. Gasoline inventories grew slightly (300,000 barrels) during the same week 249.3 million barrels (-2.8 percent versus the week of February 17, 2017). Inventories of distillate fuel oil shrank by 2.4 million barrels to 138.9 million barrels, 15.9 percent below year-ago inventories. 

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