September Existing Home Sales, Leading Indicators, Oct. UI Claims

Home Sales Rebound, Indicators Dip on Stock Prices, Claims Low

  • Existing Home Sales for September increased by 4.7 percent to an annual rate of 5.55 million units.
  • The Leading Economic Index fell by 0.2 percent in September, as the stock market dipped.
  • Initial Claims for Unemployment Insurance gained 3,000, to hit 259,000 for the week ending Oct. 17.

This morning’s U.S. economic data confirm three views on the economy. (1) Housing markets are gaining momentum. (2) Labor market conditions are tightening, and (3) unsettled international conditions are having an impact here. Existing home sales for September increased by 4.7 percent, to a 5.55 million unit rate. The September gain recovered most of the August dip, leaving the rate of existing home sales in the vicinity of where they were back in 2001 and 2002, before the surge into the housing bubble. Sales were up in all four Census regions. The months’ supply of existing homes dropped from 5.1 in August to 4.8 in September, the tightest supply since last March. The median sales price of an existing home was up 6.1 percent in September over the previous year, according to the National Association of Realtors. According to the Mortgage Bankers Association, the rate on a 30-year fixed rate mortgage fell to 3.95 percent as of October 16th, which will support home buying at the start of the fourth quarter. Another key support will be ongoing job creation. We have seen a step down in payroll job growth, from the 214,000 jobs per month average of January through July of this year, down to 139,000 for August and September. Yet, initial claims for unemployment insurance remain very low. Initial claims ticked up slightly, by 3,000, for the week ending October 17, to hit 259,000. These are numbers comparable to the mid-1970s. With the rate of new claims historically low, we join the consensus expectation for an increase in payroll job growth in October. We except to see a gain of about 200,000 jobs in October, which should be enough to bring the unemployment rate down to 5.0 percent.

The Conference Board’s Leading Economic Index for September declined by 0.2 percent, its first decline since last February. Notably, the Coincident Index and the Lagging Index were both positive for the month. We avoid the panic button until all three indexes are down at the same time, raising the spectre of a slowing economy. Looking at the details in the leading index, we take a quantum of solace. Six out of 10 components were positive for the month. The biggest negative component was stock prices, dragged down by the skyfall in China’s stock markets. Two negative components, average weekly manufacturing hours and the ISM new orders index are illustrative of the increasing headwinds for U.S. manufacturers. Like Ian Fleming’s James Bond, we think that the U.S. economy will carry on.

Market Reaction: U.S. equity markets opened with gains. The 10-year Treasury bond yield is up to 2.04 percent. NYMEX crude oil is up to $45.51/barrel. Natural gas futures are down to $2.57/mmbtu.

Alert_10_22_2015_Existing_Homes

For a PDF version of this Comerica Economic Alert click here: Existing _Home Sales 10-22-15.

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