Kicking off 2014 with my first Looking Forward Looking Back post…
Plenty of big stuff happened last week but there was not a plethora of news because of the New Year holiday. However, the news we did get last week was positive and suggests that the economy is recovering. Let’s dive in!
NAR Pending Home Sales
In case you missed last week’s big post of real estate news regarding home prices, NAR just reported that their Pending Home Sales Index for November 2013 was up from October 2013. But the bad news is that Pending Sales for November 2013 are down 1.6% from the November 2012 level.
Lawrence Yun, chief economist for NAR said:
the positive fundamentals of job creation and household formation are likely to foster a fairly stable level of contract activity in 2014.
I hope Yun is right and not just cheerleading. Especially since the Pending Home Sales numbers for October 2013 were at the lowest point in 10 months. I must point out that NAR is talking about homes under contract and not homes sold & these numbers are for the entire US.
Have Home Prices Peaked?
We got more news about home prices last week from Case-Shiller. Their 10 and 20- city home price indices for October 2013 showed a 13.60% YOY increase. On an un-adjusted basis, the 10 and 20 city indices each gained 0.20% between September and October.
However, Case-Shiller thinks the increases in home prices will slow down in 2014. Which is good news for buyers IF interest rates do not continue to rise. If rates do rise as expected, it will mean some home buyers will have to lower their home buying budget.
Consumer Confidence Rises
We did get some good news for housing and the economy last week because we found out that December’s consumer confidence reading gained 6.1 points. This was above expectations.
The previous 2 months had decreased, which may have been caused by the government shutdown in October. I am glad to report that consumer confidence in the economy is at the highest point in 5.5 years.
The national unemployment rate stood at 7.00% last week, which remains 0.50 percent above the Federal Reserve’s targeted rate of 6.50%. Weekly jobless claims came in lower than expectations. I am not going to touch upon the political hot button issue of Congress letting unemployment benefits expire. The real issue in 2014 is creating MORE good paying jobs instead of transferring more wealth to the rich IMHO.
Still, the news about the unemployment rate could be another sign that the economy is recovering. Or it could be wishful thinking since the number to watch is labor participation rate as was recently pointed out on The Basis Point:
Jobs continue to increase but the concern is that we are always getting bad schooling by the media. What should get the most attention is not the monthly increase in jobs of the unemployment rate but the portion of the adult population working. Jobs have barely been keeping pace with population growth and the percent of the population working continues to slowly decrease.
My point here is that the media concentrates on the wrong numbers. For our long-term national fiscal health we should look at the ratio of debt/GDP. For jobs we should look at the labor participation rate (percent of adult noninstitutionalized population who are part of the labor force). This was 63.0% in November and 63.6% a year before. Also, the inconsistency in the Household Survey makes it difficult to determine the real size of the labor force.
As 2014 starts a very large amount of people (about 1.3 million) will be losing their extended unemployment benefits. These people will either get a job or drop out of the labor force and this will affect the BLS jobs data for the next few months.
Sometimes it is hard to decipher the news and see what is really happening. Too many people trying to twist things to fit their own agendas instead of focusing on what is really important or best for America.
As usual, I posted my normal update on mortgage rates on Friday. Except this week I added rates from BankRate.com since the MBA skipped their weekly update or were still on break for the Holidays. Anyway, we saw the average mortgage rates increase.
Which should not have come as a big surprise to anyone because of concerns over the Fed starting to taper their QE program. Economists seem to agree on continued improvement in the economy for 2014, however rising mortgage rates and high unemployment remain as obstacles for faster economic recovery.
Stuff we need to keep our eyes out for this week includes:
- ADP Employment Report for December
- FOMC Minutes for the Meeting of December 17-18, 2013
- Trulia Price Rent Monitors for December 2013
- Employment Report for December 2013
- Mortgage Rate Reports from both Freddie Mac and the MBA
I am sure there is something else that slipped my mind but you can depend on me covering it here or sharing it on Twitter.