Housing Market Index
New home sales have been leading the home market with home builders reporting strong activity this month and predict even better times ahead. The housing market index topped economists’ predictions In May, rising 2 points to a level of 70. Current sales are also up 2 points to 76 with 6 month sales up 4 points to a very strong 79. Traffic, a key reading, is at 51 and over the breakeven point of 50 for the fifth time in the last six months. Even though traffic is nearly 30 points behind sales it is still the highlights of the report. This is the best run by fart of the expansion and offers a hopeful hint that first time buyers, who have been priced out of the new home market, may begin to be a factor.
Levels of the of the April housing starts reports were disappointing in the month. Though, still health starts fell 2.6 percent to a 1.172 million annualized rate that is well below the low estimate economists’ predicted of 1.215 million. Downward revisions are a factor in the report, totaling 27,000 in the prior two months. The strength in the report is in the single family component with starts up 0.4 percent to a rate of 835,000. Besides the increase in single family homes the report is filled with minus signs. Permits for single family homes fell 4.5% to a rate of 789,000 with completions also down 4.5 percent to 784,000. The sharpest weakness, however, comes from the multifamily homes sector where starts fell 9.2 percent to 337,000. Permits did rise 1.4 percent to 440,000 but completions declined by 17.2 percent to a 322,000 rate.
Mortgage applications activity after reaching 8-year highs last week, May 12th, retreated. Purchase applications for home mortgages fell on as a seasonally adjusted basis 3 percent from the previous week and refinance dropped 6 percent. Unadjusted, the purchase index decreased by 3 percent from the prior week, however, the level was still at a sharp 9 percent higher than a year ago. The refinance share of mortgage activity resumed its decline and was down to 41.1 percent, the lowest level since all the way back in September of 2008.Mortgage rates remained flat yet again this week. The week’s decline in purchase application may just be a temporary slackening in volume which is still 9 percent higher than a year ago.
Demand for labor is still high judging by jobless claims which remain right at record lows. Initial claims fell 4,000 in the week of May 13th to a lower than expected level of 232,000, this pulls down the four week average by 2,750 to 240,750. The week of May 13 is also the sample week for the May employment report and in comparison with the sample week of April employment showed further improvement, down 11,000 from the 243,000 in the week of April 15th, down 2,000 from the four week average of 242,750. The continuing claims side of the report tells a similar story, down 22,000 in lagging data for the week of May 6th to 1.898 million. This is a 29 year low for this reading. The four week average is down 20,000 to 1.946 million which is a 43 year low. The unemployment rate for insured workers is at 1.4 percent.