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Economic News: May 31, 2017

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Low inventory levels caused both existing and new home sales volumes to fall, while durable goods tapered off as well.
Existing Home Sales

Sales of existing single-family homes, town homes, condominiums and co-ops, dropped 2.3 percent in April to an annual rate of 5.57 million according to last week’s report from the National Association of Realtors. Compared to the same period a year ago, sales were 1.6 percent higher than April 2016’s sales.

This big cause for April’s dip? Continuing low housing inventory, which is inflating prices, and thusly hamstringing any momentum the market might gain, according to NAR Chief Economist Lawrence Yun.

“Last month’s dip in closings was somewhat expected given that there was such a strong sales increase in March at 4.2 percent, and new and existing inventory is not keeping up with the fast pace homes are coming off the market,” he said. “Demand is easily outstripping supply in most of the country and it’s stymieing many prospective buyers from finding a home to purchase.

“…Homes in the lower- and mid-market price range are hard to find in most markets, and when one is listed for sale, interest is immediate and multiple offers are nudging the eventual sales prices higher,” he added.

April’s median price for existing homes of all types was $244,800, which was up 6 percent from April 2016’s $230,900. This marked the 62nd consecutive month of year-over-year price increases.

Looking at inventory, April’s supply of existing homes jumped 7.2 percent to 1.93 million units available for sale at the end of the month. This was 9 percent below April 2016’s supply of 2.12 million homes, and marked the 23rd straight month of year-over-year inventory declines.

New Home Sales

The same dynamic played out in new home sales, as well. Sales of new single-family homes during April tumbled to an annual rate of 569,000, which was 11.4 percent below March’s pace of 642,000, the Census Bureau and the Department of Housing and Urban Development reported last week. Again, prices elevated by low inventory were to blame.

“With the (April) supply of existing homes for sale at its lowest level since 1982, home sales will be constrained even as a strong labor market and gradual loosening in credit conditions supports housing demand,” Capital Economics Property Economist Matthew Pointon told the Reuters news service.

Looking at April’s supply and price, the number of new homes for sale at the end of April came in at 268,000, which represented a 5.7-months inventory at April’s sales rate. The median price for new houses sold during April 2017 was $309,200, and the average price was $368,300.

Durable Goods Orders

New orders for manufactured durable goods placed during April fell 0.7 percent to $231.2 billion, according to last week’s report from the Census Bureau. The drop came after four straight months of increases, including March’s 2.3 percent increase.

Transportation equipment helped drive the decline, falling 1.2 percent to $78.5 billion, with a large drop-off in the commercial aircraft category being a key reason for the drop. Excluding transportation, “core” durable goods orders fell 0.4 percent.

Durable goods orders are a key leading indicator because they indicate future growth and economic activity for the entities buying those goods.