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Week In Review – January 22, 2018

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Week In Review

Volume 24, Number 3

Reginald J. Smith, Community Development Manager – Bank of Kansas City

UFSC Week In Review

Economic Highlights for the Week Ending January 22, 2018

 
 

MONDAY, January 22nd

The NAHB housing market index fell 2 points in January to a level of 72. Even with the decline the index remains near its highest level in the last 18 years, indicating continued optimism among homebuilders. This month homebuilders rating of present sales and sales six months from now slipped while foot traffic through model homes decreased slightly. Even so, the index remains at a high level and the housing market continues to be well positioned for continued growth throughout 2018.
 
 

TUESDAY, January 23rd

Housing starts declined substantially in December, falling 8.2% from November and by 6% from a year earlier. For once, the decline in starts was led by single-family homes rather than by multifamily construction, which is usually more volatile. Starts fell in all four Census regions, with the largest monthly decline in the South. The decline in housing starts is likely temporary given that housing permits were flat for December and are still up year over year.
 
 

WEDNESDAY, January 24th

Existing home sales pulled back in December, declining by 3.6% to annual pace of 5.570 million. This followed a nice gain of 5.1% in November to an annual pace of 5.78 million. The decline last month does not wipe out the gains for the year. For all of 2017, existing home sales increased 1.1% to 5.51 million in the best year for sales in 11 years. Regionally, sales fell in all areas of the country with modest declines in the South and West and moderate declines in the Northeast and Midwest. The inventory of homes available for sale fell a sharp 11.4% on the month to 1.480 million which represents just a 3.2-month supply at the current sales pace. Inventories are down a steep 10.3% from December of last year. Clearly, such low supply on the market is constraining sales and lifting prices. House prices continued to move higher over the past year as the median price for an existing home gained 5.8% to $246,800 in December from December 2016. NAR chief economist, Lawrence Yun noted Existing sales concluded the year on a softer note, but they were guided higher these last 12 months by a multi-year streak of exceptional job growth, which ignited buyer demand. He went on to say that the pool of interested buyers at the end of the year significantly outweighed what was available for sale.
 
 

THURSDAY, January 25th

New home sales declined 9.3% in December to an annualized pace of 625k after a 15.0% surge in November and a 689k annual pace. Despite recent volatility and the decline last month new home sales were up 14.1% over December 2016 and for all of 2017 clocked an 8.4% gain totaling 608k. Regionally in December new home sales fell in all areas of the country in a pullback from outsized gains the month before. Inventories of new homes available for sale were up 3.9% in December from November to 295k which represents a 5.7-month supply at the current sales pace. Both strong demand and tight supply led house price appreciation modestly higher over the last year. The median price for a new home was up 2.6% to $335,400 from December 2016. Given incoming supply and room for prices to move higher, the outlook for new home sales remains positive for 2018. The housing market is expected to remain a positive contributor to GDP growth.
 
 

FRIDAY, January 26th

The economy grew at a 2.6% annualized rate in the fourth quarter according to the advance estimate for GDP. This follows a 3.2% annual pace in Q#. The slowdown was attributed to inventory reduction which will come back as supplies are replenished to boost future GDP growth. Consumer and business spending were the main drivers of growth last quarter. Government spending also made a positive contribution. Prices firmed somewhat in Q4 with the GDP price index rising to 2.4% from 2.1% previously. This report shows healthy economic growth at the end of last year with strong momentum going into 2018.

Stock Market Close for the Week


Index

Latest

A Week Ago

Change



DJIA
26,616.71
26,071.72
+544.99 or +2.09%


NASDAQ
7,505.77
7,336.38
+233.17 or +3.38%


WEEK IN ADVANCE

After a week of mostly housing market related data, reports in the coming week wrap up the sector for the month. Watch for new home sales and pending home sales, both on next week’s calendar.


Key Interest Rates

Latest

6 Mos Ago

1 Yr Ago



Prime Rate
4.50%
4.25%
3.75%


Fed Discount
2.00%
1.75%
1.25%


Fed Funds
1.42%
1.16%
0.66%


11th District COF
0.746%
0.648%
0.603%


10-Year Note
2.66%
2.30%
2.48%


30-Year Treasury Bond
2.91%
2.89%
3.06%


30 -Yr Fixed (FHLMC)
4.15%
3.92%
4.19%


15 -Yr Fixed (FHLMC)
3.62%
3.20%
3.40%

6-Mo Libor (FNMA)
1.8370%
1.44767%
1.31767%

Sources: IBC’ s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco