Home Sales Sputtered Again: January 21 – 25

Home sales disappointed again during the final days of 2018.  Here are the five things we learned from U.S. economic data released during the week ending January 25.

Note that the partial shutdown of the federal government has delayed the release of certain economic data reports.

#1Existing home sales plummeted as 2018 ended. The National Association of Realtors indicates sales of previously owned homes dropped 6.4 percent in December to a seasonally adjusted annualized rate (SAAR) of 4.99 million units. This was the measure’s worst showing since November 2015 and represented a 10.3 percent decline from a year earlier. Sales fell in all four Census regions on both a month-to-month and year-to-year basis, including double-digit percentage drops over the previous year in the West (-15.0 percent) and Midwest (-10.5 percent). Also falling during the month was the number of unsold homes on the market, with inventories shrinking 5.1 percent to 1.550 million units. This was equivalent to a very tight 3.7 month supply (smallest since last March). The median sales price of $253,600 was a 2.9 percent gain from a year earlier. NAR’s press release included a bit of optimism for the near-term, stating that “with mortgage rates lower, some revival in home sales is expected going into spring.”

#2Forward-looking economic indicators suggest a showdown in December. The Conference Board’s Leading Economic Indicators (LEI) lost 1/10th of a point to a reading of 111.7 (2016=100), its second drop in three months. Even with the December’s decline, the LEI has risen 4.3 percent over the past year. The partial federal government shutdown delayed the release of some government economic data, which forced the Conference Board to estimate values of some LEI components. With that caveat in mind, six of the LEI’s ten components made positive contributions in December, led by first-time jobless claims, the Leading Credit Index, and the interest rate spread. Improving during the month were both the coincident and lagging indices. The former gained 2/10ths of a point to 105.1 (+2.1 percent versus December 2017) while the latter added a half point to 106.7 (+2.8 percent versus December 2017). The press release stated that the effects of the partial government shutdown had not yet been reflected in the data, but the drop in the LEI suggests “the economy could decelerate towards 2 percent growth by the end of 2019.”

#3Jobless claims fell to a nearly 50-year low in mid-January. The Department of Labor estimates there were a seasonally adjusted 199,000 first-time claims made for unemployment insurance benefits during the week ending January 19. This was 13,000 claim decline from the prior week and the fewest reported since the week ending November 15, 1969(!). By comparison, there were 229,000 first-time claims made during the same week a year ago. The four-week moving average of first-time claims was at 215,000, off 9.5 percent from a year earlier. 2.216 million people were receiving some form of unemployment insurance benefits during the week ending January 5, down 9.7 percent over the previous year

#4Home prices rose at a solid pace in November. The Federal Housing Finance Administration (FHFA) reports that its purchase-only House Price Index grew 0.4 percent during the month on a seasonally adjusted basis. This matched October’s gain, along with that of June, July, and August (September’s increase was slightly smaller 0.3 percent.) The index grew in six of nine Census regions, including sizable gains in the South Atlantic (+1.1 percent), Middle Atlantic (+1.0 percent), West South Central (+1.0 percent), and East South Central (+0.9 percent). Prices fell in the Pacific (-0.8 percent), East North Central (-0.2 percent), and West North Central (-0.1 percent) regions. FHFA’s price measure of homes purchased with a conforming mortgage has risen 5.8 percent over the past year with favorable 12-month comparables in all nine Census regions.

#5Crude oil and gasoline inventories expanded in mid-January. The Energy Information Administration tells us that U.S. crude oil inventories—net of what is held in the Strategic Oil Reserve—grew by 8.0 million barrels during the week ending January 18 to 445.0 million barrels. This was up 8.1 percent from the same week a year earlier and “about” nine percent above the five-year average for this time of the year. Gasoline inventories grew 4.0 million barrels during the same week to 295.6 million barrels, up 6.4 percent from a year earlier. Inventories of distillates contracted by 0.6 million barrels to 142.4 million barrels (+1.9 percent versus the week ending January 19, 2018). The average retail prices of gasoline—$2.25—was 12.3 percent below that of mid-January 2018.

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.