Economic Update for March 29, 2017

Economic News

Existing home sales retreated while new home sales advanced, and layoffs saw an unexpected jump.

Existing Home Sales

 After hitting their highest point in nearly 10 years in January, existing homes dipped in February. Sales of existing single-family homes,  townhomes, condominiums and co-ops fell 3.7 percent to an annual rate of 5.48 million in February from January’s rate of 5.69 million, the National Association of Realtors reported last week.

That said, a retreat from January’s strong showing was anticipated, as the market had expected sales to fall to a pace of 5.54 million. Moreover, when compared annually, February’s sales were 5.4 percent higher than February 2015.

So why the drop? National Association of Realtors Chief Economist Lawrence Yun chalked it up to one overriding factor: declining affordability.

“Realtors are reporting stronger foot traffic from a year ago, but low supply in the affordable price range continues to be the pest that’s pushing up price growth and pressuring the budgets of prospective buyers,” he explained. “Newly listed properties are being snatched up quickly so far this year and leaving behind minimal choices for buyers trying to reach the market.”

Looking at price, February’s median price for all types of existing homes came in at $228,400, which was 7.7 percent higher than February 2016’s median price of $212,100. This marked the 60th straight month of year-over-year price gains.

In terms of housing supply (a key factor in controlling prices), the number of homes for sale at the end of February grew 4.2 percent to 1.75 million units, representing a 3.8-month supply at February’s sales pace. While that growth is encouraging, February’s inventory was 6.4 percent lower than February 2016’s 1.87 million homes and marked the 21st consecutive month of year-over-year inventory attenuation.

New Home Sales

 Meanwhile, new real estate enjoyed some good news. Sales of new, single-family houses during February grew 6.1 percent to hit an annual rate of 592,000, according to last week’s joint report from the Census Bureau and the Department of Housing and Urban Development. Compared to the same period last year, February’s new home sales were 12.8 percent higher than February 2016’s pace of 525,000.

Looking at price, February’s median sales price for new homes was $296,200, and the average price was $390,400. In terms of supply, the number of new houses for sale at the end of February totaled 266,000, which represented a 5.4-month supply at February’s sales pace.

“This growth was likely spurred by several factors, including a warm winter that allowed builders to stick to construction schedules, last year’s strong home construction starts, and a gradual shift from building apartments to individual homes,” noted Joseph Kirchner, senior economist at “… While this growth is encouraging, it’s important for house hunters to keep in mind that builders have been focusing on the more pricey part of the market; affordable options are still in short supply.”

Initial Jobless Claims

 First-time claims for unemployment benefits filed by the newly jobless during the week ending March 18 saw a surprise jump to 261,000, an    unexpected spike of 15,000 claims over the preceding week’s total of 246,000, the Employment and Training Administration reported last week.  The market had expected claims to total 239,000.

Meanwhile, the four-week moving average — considered a more reliable measure of jobless claims than the weekly snapshot — ticked up to 246,500, a gain of 3,500 claims from the previous week’s average of 243,000.

In any case, jobless claims remained in safe territory. This marked the 106th consecutive week that initial jobless claims were below the 300,000-claim mark, a threshold that economists say indicates a growing job market.
Tuesday — Wholesale inventories for February from the Census Bureau; consumer confidence for March from The Conference Board.
Thursday — Fourth-quarter gross domestic product, third estimate, from the Bureau of Economic Analysis; initial jobless claims for last week from the Employment and Training Administration.
Friday — Personal incomes and spending for February from the Bureau of Economic Analysis; consumer sentiment for March from the University of Michigan Survey of Consumers.