Recapping the big news for real estate, housing & the economy from last week, today’s news and what to keep an eye for the week of 2-3-2014…
Lots of news for housing and the economy so let’s dive right in!
New Home Sales
I kicked off last week’s Looking Forward Looking Back post with the BIG news about new home sales. To recap, New Home Sales were down 7% from the November 2013 level but are up 4.5% from the December 2012 level.
This was the highest reading since 2008!
The inventory of available new homes rose to a 5 month supply in December 2013. Once again we heard the lame excuse that cold weather was the cause of lower new home sales. Economists are concerned that rising mortgage rates, new mortgage rules and high unemployment could lead to slower home sales in 2014.
The median price of a new home rose by 0.60% in December 2013 ($270,299).
The national median home price was for all of 2013 was up 8.40% YOY.
This is the highest annual growth rate for median home prices since 2005.
Pending Home Sales
We also got more bad news last week regarding NAR’s Pending Home Sales Index. In case you missed my post last week, let me recap:
- The December 2013 Pending Home Sales Index fell 8.7% from the November 2013 level
- The December 2013 Pending Home Sales Index is 8.8% lower than the December 2012 level
- This is the lowest level since October 2011
Does not sound good. And like I said, the excuse that the weather caused the dip in Pending Home Sales is lame. Lame and weak.
Good News for Home Prices
Not all of the news last week was bad. We did get good news from Case-Shiller:
- The 10-City Composite increased 13.8% year-over-year
- The 20-City Composite increased 13.7% year-over-year
Please remember this is talking about home prices for the entire US. Always rely upon someone with expertise in your local market
Fed Cuts Back on Quantitative Easing
Not a big surprise that the Fed is once again cutting back on their monthly asset purchases made under its quantitative easing program. Monthly purchases of mortgage-backed securities and Treasury securities will be reduced from January’s level of $75 billion to $65 billion in February.
The Other Big News from the Fed
Well it is official. Yellen is now Chair of the Board of Governors of the Federal Reserve System and Bernanke is headed to the Brookings Institute. Yellen has her work cut out for her as the Fed has to start winding down QE without totally destroying the economy. Or hurting what little progress has been made on helping the economy recover.
And Yellen is going to have to deal with the idiots in Congress. And do both of these without freaking Wall Street out. Should be interesting to watch.
As usual, I shared the latest average mortgage rates on Friday. I also included some info from FHFA but it is a little more dated than the info from Freddie, the MBA and Bankrate.com. Despite the Fed cutting back even more on QE, mortgage rates dipped slightly.
Employment / Unemployment
We found out some more good news from the BLS last week as unemployment improved in 39 states.
Last week we found out that both the Thompson Reuter/University of Michigan Consumer Sentiment Index and Gallup’s latest Economic Confidence polls fell.
Which sounds bad. But today we found out that home builders are feeling more confident:
Builder confidence in the 55+ housing market for the fourth quarter of 2013 is up sharply, according to the National Association of Home Builders’ (NAHB) latest 55+ Housing Market Index (HMI) released today. All segments of the market—single-family homes, condominiums and multifamily rental—registered strong increases compared to the same quarter a year ago. The single-family index increased 20 points to a level of 48, which is the highest fourth-quarter reading since the inception of the index in 2008 and the ninth consecutive quarter of year over year improvements.
I hope the home builders are correct in feeling more confident. The economy gets such a big boost from a healthy housing market. While new homes are only a portion of the real estate market, they do make a difference.
Construction Spending Increases
Maybe the healthy confidence that the home builders are feeling is due to today’s news from the Census Bureau:
The U.S. Census Bureau of the Department of Commerce announced today that construction spending during December 2013 was estimated at a seasonally adjusted annual rate of $930.5 billion, 0.1 percent above the revised November estimate of $929.9 billion. The December figure is 5.3 percent above the December 2012 estimate of $883.6 billion.
Check out the chart showing residential construction spending (red line is Not Seasonally Adjusted):
Private residential spending is still 48% below the peak way back in early 2006. But it is up 54% from the post-bubble low. Single-family spending registered a healthy increase of 3.4% for the month, while the multifamily category saw a more modest increase of 0.5%. The home improvement category saw an increase of nearly 2.0% for the month.
Home Ownership Levels
On Friday, we got the latest numbers from the Census Bureau on Home Ownership levels. The home ownership level for the 4th Quarter of 2013 was 65.2% which is lower than the 65.4% we saw in the 4th Quarter of 2013. I could go on and on about how owning a home is a positive thing.
Check out the chart (red is seasonally adjusted):
The Census Bureau also reported that the median asking sales price for a vacant house in the 4th Quarter of 2013 was $141,000, which is up from $137,000 for the 4th Quarter of 2012.
While the level of home ownership is important I did read an interesting article this week about Why Home Ownership Rate is Misleading
ISM Manufacturing Index
We got some news today from the Institute for Supply Management. They said:
Economic activity in the manufacturing sector expanded in January for the eighth consecutive month, and the overall economy grew for the 56th consecutive month.
The January PMI® registered 51.3 percent, a decrease of 5.2 percentage points from December’s seasonally adjusted reading of 56.5 percent. The New Orders Index registered 51.2 percent, a significant decrease of 13.2 percentage points from December’s seasonally adjusted reading of 64.4 percent. The Production Index registered 54.8 percent, a decrease of 6.9 percentage points compared to December’s seasonally adjusted reading of 61.7 percent. Inventories of raw materials decreased by 3 percentage points to 44 percent, its lowest reading since December 2012 when the Inventories Index registered 43 percent. A number of comments from the panel cite adverse weather conditions as a factor negatively impacting their businesses in January, while others reflect optimism and increasing volumes in the early stages of 2014.
Weak report but remember they said the overall economy and economic activity in manufacturing both grew.
Not a super huge amount of stuff we need to watch this upcoming week, However we need to keep an eye on:
- Congressional Budget Office’s Budget and Economic Outlook
- ADP Employment Report
- Unemployment Claims
- January Unemployment Report
- Consumer Credit report from the Fed
- Mortgage Rates
I am sure that I missed something but you can bet it will be covered here. Please subscribe so you never miss any of the big news for housing, real estate or the economy!