Last Week’s Economic News In Review January 27, 2016
Existing home sales bounced back while new home construction fell off, and lay-offs took an unexpected jump.
Existing Home Sales
Sales of existing homes enjoyed a rebound in December, with completed transactions of single-family homes, townhomes, condominiums and co-ops, growing a solid 14.7 percent to hit an annual rate of 5.46 million for the month, the National Association of Realtors reported last week. December’s existing home sales were 7.7 percent higher than a year ago, and capped off the best year of existing home sales since 2006.
“While the carryover of November’s delayed transactions into December contributed greatly to the sharp increase, the overall pace taken together indicates sales these last two months maintained the healthy level of activity seen in most of 2015,” NAR Chief Economist Lawrence Yun said. “Additionally, the prospect of higher mortgage rates in coming months and warm November and December weather allowed more homes to close before the end of the year.”
Prices continued to rise, with December’s median existing-home price for all housing types hitting $224,100, a 7.6 percent increase over December 2014’s $208,200. This marked the 46th consecutive month of year-over-year gains.
Looking at supply, December’s housing inventory fell 12.3 percent to 1.79 million existing homes for sale, which was 3.8 percent lower than December 2014’s 1.86 million. This put December’s housing inventory at a 3.9-month supply, which was down from November’s 5.1-month supply, and the lowest since January 2005’s 3.6-month supply.
New Home Construction
In related news, construction permits for housing units issued in December fell 3.9 percent to an annual rate of 1.23 million, according to last week’s report from the Census Bureau. That said, permits for the month were still 14.4 percent higher than December 2014. Also, permits issued for single-family homes grew 1.8 percent for December to hit a rate of 740,000.
Similarly, starts on construction of private housing dropped 2.5 percent in December to an annual rate of 1.14 million, but were still 6.4 percent higher than December 2014. Construction starts on single-family homes dropped 3.3 percent to a rate of 794,000.
“Builders are extremely cautious to increase spending for fear of over-extending themselves in case there’s an economic downturn,” Chief Fixed-Income Strategist for Janney Montgomery Scott LLC Guy LeBas told Bloomberg. “We’ll see continued demand for new housing and prices will move higher, but builders aren’t accelerating new construction.”
Initial Jobless Claims
First-time claims for unemployment benefits filed by the newly unemployed during the week ending January 16 hit 293,000, the Employment and Training Administration reported last week. This marked a 10,000-claim increase over the previous week’s total of 283,000 and was the exact opposite of what the market expected, which was a 3,000-claim drop.
The four-week moving average — considered a more stable measure of lay-offs — hit 285,000 claims, an increase of 6,500 claims over the previous week’s average of 278,500.
“The recent uptick in jobless claims is a negative at the margins,” Chief Investment Officer at Plante Moran Financial Advisors Jim Baird told the Wall Street Journal. “But even at this modestly elevated level, claims remain in a range that is still consistent with moderate growth.”
This week we can expect:
- Tuesday — Consumer confidence for January from The Conference Board.
- Wednesday — New home sales for December from the Census Bureau.
- Thursday — Initial jobless claims for last week from the Employment and Training Administration; durable goods orders for December from the Census Bureau.
- Friday — Fourth quarter gross domestic product (advance) from the Bureau of Economic Analysis; consumer sentiment for January from the Thompson-Reuters/University of Michigan Survey of Consumers.