News & Events

Archive for October, 2016
 
Economic Advisor: October 27, 2016
October 27, 2016


 

First-time buyers helped fire up existing home sales, while building permits and housing starts were a mixed bag. Layoffs increased, but remained in safe territory.

Existing Home Sales

Sales of existing single-family homes, townhomes, condominiums and co-ops grew 3.2 percent in September to hit an annual rate of 5.47 million, pushing sales to their highest pace since June, according to last week’s report from the National Association of Realtors. Compared to last year, September’s sales were 0.6 percent over December 2015’s pace of 5.44 million.

September’s gains marked the end of a two-month slump, said NAR Chief Economist Lawrence Yun, who added the major driver for the increase was first-time buyers, which represented a 34 percent share of the September’s homebuyers.

“The home search over the past several months for a lot of prospective buyers, and especially for first-time buyers, took longer than usual because of the competition for the minimal amount of homes for sale,” Yun explained. “Most families and move-up buyers look to close before the new school year starts. Their diminishing presence from the market towards the end of summer created more opportunities for aspiring first-time homeowners to buy last month.”

Looking at affordability, September’s median price for existing homes of all types grew 5.6 percent to hit $234,200, marking the 55th straight month of year-over-year price gains. In terms of supply, the total number of homes for sale at the end of September rose 1.5 percent to 2.04 million existing homes available for sale, representing a 4.5-month inventory of homes for sale. Inventory has been an ongoing concern according to Yun.

“Inventory has been extremely tight all year and is unlikely to improve now that the seasonal decline in listings is about to kick in,” he said. “Unfortunately, there won’t be much relief from new home construction, which continues to be grossly inadequate in relation to demand.”

Building Permits & Housing Starts

Looking at recent inventory activity, permits issued for construction of private homes in September grew to an annual rate of 1.22 million, which was 6.3 percent over August’s rate of 1.15 million, and is 8.5 percent higher than the September 2015’s pace of 1.12 million, according to The U.S. Census Bureau and the Department of Housing and Urban Development. Permits issued for single-family homes grew 0.4 percent to an annual rate of 739,000.

Construction starts on private housing in September dropped to an annual rate of 1.04 million, marking a 9 percent decline from August’s estimate of 1.15 million, and an 11.9 percent drop from September 2015’s rate of 1.18 million. That said, starts on single-family homes in September hit a rate of 783,000, which marked an 8.1 percent gain over August’s pace of 724,000.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the recently laid off during the week ending October 15 hit 260,000, a gain of 13,000 claims from the preceding week’s total of 247,000 claims, the Employment and Training Administration reported.

The four-week moving average — considered a more reliable measurement of layoffs — notched up to 251,750, an increase of 2,250 claims from the prior week’s average of 249,500.

Last week’s performance marked 85 straight weeks of initial jobless claims staying below 300,000, which economists consider indicative of a growing job market. This is the longest such streak since 1970.

This week, we can expect:

  • Tuesday — Consumer confidence for October from The Conference Board.
  • Wednesday — New homes sales for September from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; durable goods order for September from the Census Bureau.
  • Friday — Third quarter GDP from the Bureau of Economic Analysis; consumer sentiment for October from the University of Michigan Survey of Consumers.

Posted in Economic Advisor



Economic Advisor: October 19, 2016
October 19, 2016


 

Retail sales enjoyed decent growth, while layoffs continued to hit historic lows and producer prices increased more than expected.

Retail Sales

Retail sales were in line with market projections, growing 0.6 percent in September to hit $459.8 billion for the month, the Census Bureau reported last week. Gains in the automotive market was a big contributor to September’s growth, with sales of motor vehicles and parts increasing 1.1 percent and gasoline stations seeing a 2.4 percent increase.

Additionally, there were other various strong segments across the retail spectrum: furniture and home furnishing were up 1 percent; building material and garden supply stores gained 1.4 percent; sporting good, hobby, book and music stores grew 1.4 percent; and miscellaneous retailers grew 1.8 percent.

The retail numbers, mixed with other indicators, led many economists to conclude that rates would likely increase by the end of the year. While some stated that position more strongly than others, TD Securities Economist Brittany Baumann took a measured tone.

“Overall, the details of the report are more positive than what the modest print on core sales suggests,” Baumann told Reuters. “Together with healthy levels of consumer sentiment and continued improvement in labor market conditions, today’s report is enough to keep a December Fed rate hike firmly on the table.”

Producer Price Index

The Producer Price Index for final demand goods rose 0.3 percent in September after seeing no change in August, the Bureau of Labor Statistics reported last week. This was ahead of the market expectation for a 0.2 percent gain, and overall, the index is up 0.7 percent from the same period a year ago, which marks the largest annual rise since December 2014.

Final demand goods are the wholesale goods that are sold to retailers, who ultimately sell those goods to customers. Prices for final demand goods are important to track, because they indicate where consumer prices, and thusly inflation, are headed. That information is important to the housing market, because the Fed typically increases interest rates as a response to increased inflation. 

In September’s case, the gains were “consistent with the notion that price pressures are beginning to accumulate and suggest that the consumer-price readings may continue to be firm going forward,” Amherst Pierpont Securities Economist Stephen Stanley told the Wall Street Journal.

Initial Jobless Claims

Layoffs fell to their lowest point in more than 40 years. First-time claims filed by the newly unemployed during the week ending October 8 were down to 246,000 claims, according to last week’s report from the Employment and Training Administration.

That total was well below the 255,000 claims the market had expected, and made it the 84th straight week that claims have been below 300,000 claims, a threshold that economists generally consider an indicator that the job market is growing. Layoffs haven’t seen that long of a streak of initial claims staying below 300,000 since 1970.

The four-week moving average — considered a more stable measure of layoffs — dropped 3,500 claims from the previous week’s average to 249,250 claims. The economy hasn’t seen the average reach that low since November 3, 1973, when claims dipped to 244,000.

This week, we can expect:

  • Monday — September industrial production and capacity utilization from the Federal Reserve.
  • Tuesday — September consumer price index for September from the Bureau of Labor Statistics.
  • Wednesday — September housing starts and building permits from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; September leading economic indicators from The Conference Board; existing home sales for September from the National Association of Realtors.

Posted in Economic Advisor



Economic Advisor: October 12, 2016
October 12, 2016


 

Construction spending shrank again, while the unemployment rate ticked up, and initial jobless claims fell yet again.

Construction Spending

Construction spending fell for the second month in a row in August. While the market had expected a 0.2 percent gain in construction spending for August, it actually dropped 0.7 percent to an annual rate of $1.142 trillion, the Census Bureau reported last week. August’s performance marked construction spending’s lowest level in eight months, and when compared annually, it was 0.3 percent below August 2015’s pace of $1.145 trillion.

“While demand for construction remains robust, it is no longer growing like it was earlier this year,” Associated General Contractors of America Chief Economist Ken Simonson told the New York Times.

Spending on private construction dropped 0.3 percent in August to an annual rate of $871.6 billion, with residential construction following suit, also dropping 0.3 percent to an annual rate of $449.2 billion.

Unemployment

The economy added 156,000 non-farm jobs in September, with the unemployment rate skirting up to 5 percent from August’s 4.9 percent, and the total unemployed population totaling 7.9 million, according to last week’s update from the Bureau of Labor Statistics. Key sectors that added jobs were professional and business services, as well as healthcare.

Part of the reason why the rate might have crept up slightly is because more people are involved in the job market. The labor force participation rate — the percent of employable Americans either employed or actively looking for work — crept up from 62.8 in August to 62.9 percent in September.

The number of Americans involuntarily employed part-time for economic reasons such as that was the only work they could find or their hours were cut was essentially unchanged at 5.9 million people in September. The number of people unemployed for 27 weeks or longer — the long-term unemployed — hovered at 2 million people and accounted for 24.9 percent of the unemployed population.

Employment has been a key sector for mortgage rate watchers, and unfortunately it doesn’t look like this month’s jobs report will result in rate increases at the Federal Reserve.

“Come back again next month,” said Michael Gapen, chief U.S. economist for Barclays Plc. Gapen added that the latest report “has something for everybody, and therefore it is unlikely to move the market thinking or Fed thinking about a December rate hike.”

Initial Jobless Claims

Looking at more recent employment numbers, first-time claims for unemployment benefits filed by the newly laid off during the week ending October 1 fell to 249,000, a decline of 5,000 claims from the prior week’s total of 254,000, the Employment and Training Administration reported last week.

This was the 83rd straight week of first time claims coming in below 300,000, the longest streak since 1970. Economists generally consider initial claims below the 300,000 as an indicator of a growing job market.

The four-week moving average — considered a more stable measure of lay-off activity — dipped to 253,500, a decline of 2,500 claims from the preceding week’s average of 256,000. This marked the lowest level for the four-week average since December 8, 1973’s average of 252,250.

This week, we can expect:

  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; import and export prices for September from the Census Bureau and the Bureau of Economic Analysis; September budget from the Treasury.
  • Friday — Producer price index for September from the Bureau of Labor Statistics; August business inventories and retail sales for September from the Census Bureau.

Posted in Economic Advisor



Economic Advisor: October 5, 2016
October 10, 2016


 

New home sales were down but outpaced market expectations, while lay-offs crept up but remained well inside safe territory, and personal incomes were up.

New Home Sales

The big news last week was new home sales for August, which hit an annual rate of 609,000, according to last week’s joint report from the Census Bureau and the Department of Housing and Urban Development.

This marked a 7.6 percent drop from July’s rate of 659,000, but was 13,000 units higher than the 585,000-unit pace the market had expected. Compared to last year’s sales for the same time period, August’s sales were 20.6 percent over August 2015’s rate of 505,000.

Looking at price and supply, August’s median sales price for new homes was $284,000, and the average price was $353,600. The inventory of new home for sales at the end of August was 235,000, which represented a 4.6-month supply at August’s sales rate. Once again, many economists pointed at narrow inventory as a cause of inflated prices, which ultimately cut into sales volume.

“After a solid July, new home sales came back to earth a little bit in August, though last month’s data still offer some decent news for the market,” Zillow Chief Economist Svenja Gudell told Housingwire. “… Builders have been focused on the higher end of the market for much of the past few years, but there are concrete signs emerging that more attention is now being paid to the lower end — new homes priced in the $200,000-$299,000 range, just below the median price, saw the biggest jump in sales activity.”

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending Sept. 24 hit 254,000, a gain of 3,000 claims over the preceding week’s total of 251,000, the Employment and Training Administration reported last week. The gain was much lower than the increase to 259,000 claims that job market watchers had expected.

The four-week moving average — considered a more stable measure of lay-offs — actually dipped to 256,000 claims, a loss of 2,250 claims from the prior week’s average of 258,250.

This marked the 82nd straight week that claims have been below the 300,000-claim mark that economists consider indicative of a growing job market. This is the longest such streak since 1970.

“It is difficult to communicate just how extraordinary these data have been over the past year,” Stephen Stanley chief economist of Amherst Pierpont Securities wrote in a public client statement.

Personal Incomes and Spending

Personal incomes grew 0.2 percent, or $39.3 billion, in August, the Bureau of Economic Analysis reported last week, which was in line with market expectations of 0.2 percent growth. Disposable personal income (DPI; income after taxes) grew by 0.2 percent, or $31.9 billion.

Personal consumption expenditures (PCE) increased $6.2 billion (less than 0.1 percent). Personal outlays — purchases of durable and non-durable goods — increased $6.1 billion in August. Personal saving grew to $807.6 billion in August from July’s $781.9 billion and the personal saving rate —savings as a percentage of DPI — ticked up to 5.7 percent from 5.6 percent in July.

This week, we can expect:

  • Monday — Construction spending for August from the Census Bureau; car and truck sales for August from the auto manufacturers.
  • Wednesday — Balance of trade for August from the Census Bureau and the Bureau of Economic Analysis; August factory orders from the Census Bureau.
  • Thursday — Initial jobless claims for last week form the Employment and Training Administration.
  • Friday — Consumer credit for August from the Federal Reserve; wholesale inventories for August from the Census Bureau; September payrolls, unemployment rate, hourly earnings and average workweek from the Bureau of Labor Statistics.

Posted in Economic Advisor



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