Existing Home Sales Stabilize After a Big Slide
- Existing Home Sales for April ticked up by 1.3 percent, to an annual rate of 4.65 million units.
- The Conference Board’s Leading Economic Index increased by 0.4 percent in April.
- Initial Claims for Unemployment Insurance rose by 28,000 to hit 326,000 for the week ending May 17.
The demand for housing is fundamentally a local issue. However, mortgage availability is increasingly a national issue. Within the confluence of local and national impulses, there is a balance of traditional home buyers and institutional buyers. Prices, now up 11.4 percent year-over-year according to the Case-Shiller U.S. House Price index, add a complex dynamic. So too does the lingering swamp of underwater homes, recently estimated by Zillow at 9.7 million, representing 19.8 percent of U.S. homeowners. Add to the mix the fact that mortgage rates increased rapidly in the second half of last year. The result of these varied forces is an existing home market that is in flux. Existing home sales hit a peak last July, at a 5.38 million unit rate, and then declined in 7 of the next 8 months. Fortunately, in April, existing home sales increased slightly by 1.3 percent to hit an annual rate of 4.65 million units. We expect that improving economic conditions across most U.S. localities will fuel ongoing gains in existing home sales. Flattish mortgage rates since the middle of 2013 are helping. More help may come from a relaxation of some credit standards by mortgage processors Fannie Mae and Freddie Mac. Federal Housing Finance Agency Director Mel Watt (Mr. Watt is both the conservator and head regulator of Fannie Mae and Freddie Mac) has recently been quoted saying that Fannie and Freddie should continue to improve liquidity in the single-family housing market.
The Conference Board’s Leading Economic Index increased by 0.4 percent in April, following a strong 1.0 percent gain in March. The five components of the Leading Index that were up in April, in order of positive contribution: interest rate spread, residential building permits, the Leading Credit Index, manufacturers’ new orders for consumer goods and materials, and consumer expectations of business conditions. The Conference Board’s Coincident index was up by 0.1 percent in April and its Lagging index was up by 0.2 percent. Initial claims for unemployment insurance zagged back up by 28,000 to hit 326,000 for the week ending May 17, after zigging down the week before. The trend remains consistent with ongoing improvement in labor market conditions. Continuing claims for the week ending May 10 eased by 13,000 to hit 2,653,000, the lowest level for that series since December 1, 2007.
Market Reaction: U.S. equity markets are up. Treasury yields are up at the long end of the yield curve. NYMEX crude oil is down to $103.93/barrel. Natural gas futures are down to $4.39/mmbtu.
For a PDF version of this Comerica Economic Alert click here: Existing Home Sales 05-22-14.