Home Sales Struggle For Lift, Prices Firming, Leading Indicators Say Lift Is Coming
- Existing Home Sales for February decreased by 0.9 percent, to a 4.59 million unit sales rate.
- New Home Sales for February fell by 1.6 percent, to a 313,000 unit pace.
- The FHFA’s Purchase-Only House Price Index was unchanged in January.
- The MBA’s Mortgage Applications Index was down 11 percent over the 4 weeks ending March 16.
- The Conference Board’s Leading Economic index increased by a strong 0.7 percent in March.
- Initial Claims for Unemployment Insurance fell by 5,000 for the week ending March 17, to 348,000.
Existing home sales remained weak in February and new home sales were still depressed, but the trends for both look promising. However, lackluster mortgage applications for March suggest that the next data point for home sales will not be a break out. Home prices are slipping less badly, which, at this point in time is a compliment. And we are seeing reports of gradually improving builder confidence and construction activity. All in all, the basket of residential real estate data is looking less bad, verging on better, suggesting that the housing sector is in transition from a strong drag on overall economic activity, to at least being neutral, if not a small positive. Recently higher mortgages rates, under mild upward pressure after the FOMC’s less dour economic assessment and policy announcement of March 13, may have caught some prospective buyers off guard. It may also serve as a warning that exceptionally low home mortgage rates will not last forever, focusing buyer intent. Existing home sales for February fell slightly by 0.9 percent to a 4.59 million unit annual rate. Sales were strongest in the Midwest, up 1.0 percent for the month, supported by a reinvigorating auto sector. According to the National Association of Realtors, the median sales price of an existing home gained 0.3 percent in February. Another source for home price data, the Federal Housing Finance Agency said that U.S. house prices were unchanged from December to January. New home sales also dipped a little in March, off 1.6 percent to a 313,000 unit annual rate.
Recent economic data outside of housing points to firmer housing-related data later this spring. The Conference Board’s leading economic index increased by 0.7 percent in March, pushed up by strong residential construction permits and improving unemployment insurance claims. The coincident and lagging indexes each gained 0.2 percent in March. All three indexes in the positive is a good signal, and we have had that for three consecutive months. Initial claims for unemployment insurance fell by 5,000 for the week ending March 17, to hit 348,000. The last time we were consistently below 350,000 on initial claims was in the first quarter of 2008.
Market Reaction: Equity prices are sliding. Treasury yields are down. Oil is up to $106.92/barrel. The dollar is down against the yen and the euro.