New Home Sales
New home sales fell by a monthly 7.6 percent in August, the 609,000 annualized rate is still above economist’s predictions of 598,000 for the month. A major plus in the report is a 5,000 upward revision to July which is now the cycle high at a rate of 659,000 and a monthly gain from June of 13.8 percent. Prices are coming down which points to builder discounting. The median is at $284,000, which is down 3.1 percent in the month and down 5.4 percent on the year. Low supply is not helping to lift prices , supply is at 4.6 months. Total new homes for sale rose slightly in the month to a level of 235,000. Year on year supply is up 8.3 percent, but this is far under the 20.6 percent gain on yearly sales. This report underscores the accelerating strength of the new home market, strength that is making up for far less momentum on the resale side.
S&P Corelogic Case-Shiller HPI
Home prices have been moderating this year. This includes the 20-city Case-Shiller adjusted index; following three prior declines, the index came in unchanged in data for July. Yearly prices slipped 1 tenth in the month to plus 5.0 percent for the lowest rate of the year. This number has been up to double digits as recently as 2014. Tightening supply of resales on the market has yet to boost prices.
Consumer confidence is on the upswing, pointing to a possibility of an upturn for consumer spending. The September index rose more than 3 points to 104.1, beating the high end of economists’ forecast by nearly 2 points. This is also a new cycle high, beating the previous cycle high placed in January of 2015 of 103.8.The assessment of September’s labor market is upbeat with more consumers saying jobs are plentiful and fewer saying they’re hard to get; the latter down 1.2 percentage points to 21.6 percent. Another plus in the report is improvement in the 12-month outlook, up 2 tenths to 5.0 percent for the best reading of the year. Negatives include an easing in income prospects and weakness in long term buying plans.
Purchase application for home mortgages rose a seasonally adjusted 1 percent in the week of September 23rd compared to the previous week. This puts the purchase index 10 percent higher than it was the same week one year ago. Refinancing applications, however, fell 21 percent from the previous week despite lower interest rates this week. The refinancing share of mortgage activity declined 0.4 percentage points to 62.7 percent. Mortgage rates fell this week to ten week lows after rising in the prior week.
An upgrade for nonresidential fixed investment helped to give a boost to the second revision of the second quarter GDP which, though still modes, now stands at an annualized rate of plus 1.4 percent for a three tenths gain from the original first revision. Nonresidential investment is now revised into the plus column, up a quarterly 1.0 percent from a decline of 0.9 percent in the prior report. Residential investment once strong in prior quarters is unchanged at minus 7.7 percent in the quarter for a minus3 tenth contribution. Consumer spending was very strong in the quarter, at a 4.3 percent annualized rate and contributing 2.9 percentage points to the GDP. This strength is reflected in final sales which are revised 2 tenths higher to 2.6 percent well up from 1.2 percent in the prior two quarters. Exports are revised 6 tenths higher up 1.8 percent as net exports added 2 tenths to the quarter’s GDP. The GDP price index is unchanged at 2.3 percent. The early outlook for third quarter GDP is roughly in the 2 ½ to 3 percent range.
Jobless claims remain very low and continue to point to strength in the labor market. Initial claims increased by 3,000 in the week of September 24th to a level of 254,000 though the four week average is down 2,250 to 256,000. Continuing claims are also pointing to strength down a steep 46,000 to 2.062 million in the lagging data for the week of September 17th. The week of September 17th was also the sample week for the monthly employment report and comparisons show an 11,000 decline for initial claims and 83,000 decline in continuing claims, both declines are sizable/
Pending Home Sales
Existing home sales have not been able to build any strength this year in sharp contrast to new home sales, this report points to weakness in the pending home sales in the upcoming months. The pending homes index fell a very steep 2.4 percent in August with three of the four regions posting monthly declines. Weakness persists in the pending home market despite low mortgage rates and strength in the labor market.
Consumer Sentiment is showing strength rising 1.4 points from both mid-month and final August to a final September reading of 91.2. The gain relative to mid moth implies a 92 to 93 pace for the last two weeks of the month which would be the strongest reading since June. The expectation component leads the report, up 4 points in the month to 82.7 and reflecting confidence among higher income households. The current condition index, in a negative indication for Septe3mber consumer spending, fell almost 3 points to a level of 104.2. This is a mixed report though the strength in expectations does match that seen earlier this week in the consumer confidence report, indications that point to long term confidence in the labor market.