Volume 24, Number 26
Reginald J. Smith, Community Development Manager – Bank of Kansas City
Economic Highlights for Week Ending July 27, 2018
MONDAY, July 23rd
Existing home sales fell 0.6% in June to an annual pace of 5.38 million following a decline of 0.7% in May to an annual rate of 5.41 million. Existing home sales are trending lower and remain down 2.2% from their June 2017 rate. Regionally, sales dropped 2.2% in the South and 2.6% in the West which was partially offset by a 5.9% gain in the Northeast and a 0.8% gain in the Midwest. The inventory of homes available for sale rose 4.3% on the month to 1.950 million which represents just a 4.3-month supply at the current sales pace. Inventories remained down 0.5% on the 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 5.2% in June to $276,900, a new all-time high. NAR chief economist, Lawrence Yun said that there is growing homebuyer demand but the actual pace of home sales is declining. He cites the root cause as the severe housing shortage which is keeping home price growth elevated, pricing out would-be buyers and ultimately slowing sales.
TUESDAY, July 24th
The Federal Housing Finance Agency (FHFA) Purchase-Only House Price Index rose 6.4% in May on a year-ago basis, which is in line with the previous month’s increase. Inventories remain limited, which keeps the housing market tight and house prices climbing higher. Appreciation was broad-based with house prices in all regions of the country posting gains on a year-ago basis.
WEDNESDAY, July 25th
The MBA mortgage applications index fell 0.2% for the week ending July 20. The purchase index was down 1.0% on the week as the refinance index increased 1.0%. Contract mortgage interest rates were unchanged on the week; the 30-year fixed rate mortgage remained at 4.77%.
New home sales dropped 5.3% in June to an annualized pace of 631k following a gain of 3.9% in May and an annual rate of 666k. Despite the decline last month, new home sales remain 2.4% higher than their level in June 2017. Regionally, new home sales were again wildly mixed with declines in three of the four regions of the country and an outsized gain of 36.8% in the Northeast. The inventory of new homes available for sale rose slightly to 301k in June which represents a 5.7-month supply at the current sales pace. The supply of new homes on the market is near the supply/demand balance of 6 months. New home prices were down over the past year with the median price for a new home 4.2% lower at $302,100. Beneath all the volatility in this report is a new home market that is showing some weakness, along with the broader housing market. Less-than-favorable mortgage rates are one reason for the slowing as are constraints on new building including scarcity of skilled construction labor as well as materials.
THURSDAY, July 26th
Initial claims for unemployment insurance are less reliable this time of year because of the seasonal adjustment issues surrounding the Fourth of July holiday and annual auto plant retooling. Therefore, it is important not to read too much into the latest swings. Jobless claims rose 9k to 217k in the week ended July 21, more than reversing the prior week’s decline. Still, initial claims are low and suggest that the labor market is strong.
FRIDAY, July 27th
U.S. GDP growth was strong in the second quarter, supported by fiscal stimulus and strong job growth. Real GDP grew at a 4.1%pace last quarter, after growing at a revised 2.2% pace in Q1. Growth was widespread, including fixed investment, consumer spending and exports. Inventories were a major drag on growth and imports were a slight drag. Real disposable income growth slowed to 2.6% from tax-cut-inflated growth of 4.4% in the first quarter. The saving rate slipped to 6.8%, from 7.2% in the first quarter. The saving rate was revised dramatically higher.
Stock Market Close for the Week
A Week Ago
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 Sources: IBC’ s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
Key Interest Rates
6 Mos Ago
1 Yr Ago
Sources: IBC’ s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco