Friday, November 18, 2016
U.S. GDP -- which had hovered closer to 1.0 percent during the previous three quarters ---- surged to 2.9 percent in the third quarter, due mostly to rising inventory of goods, higher exports, and more federal government spending.
Nonetheless, there is an important caveat here to consider: Although a 4.9 percent unemployment rate implies that the economy is more or less at full employment, by also including discouraged workers, the under-employed and those persons marginally attached to the workforce, the unofficial unemployment rate rises to 9.5 percent – or exactly matching what it was in October 2015.
This higher unemployment rate is also why wages had been stubbornly flat during this long economic recovery, although over the last 12 months they did rise by 2.8 percent, thus giving workers a slight edge over inflation.
Confidence is trending higher, with the University of Michigan’s Consumer Sentiment Survey edging up to 91.6 in its preliminary November reading – up 5.0 percent from October and 0.3 percent from a year ago. At the same time, builder confidence has remained at well over 60 for three consecutive months (anything over 50 is positive), and is approaching 70 for single-family home sales now as well as over the next six months.
Still, given tight levels of supply in most markets, affordability remains a concern, with 61.4 percent of families earning the median income able to afford the median-priced home at prevailing interest rates in the third quarter of 2016. While this rating from the Wells Fargo Housing Opportunity Index is down sharply from the last high of 77.5 noted in the first quarter of 2012, it remains far above the previous trough of 40.4 set in the third quarter of 2006.
For existing homes, sales also rebounded 3.2 percent in September to 5.47 million per year, but are up just 0.6 percent year-over-year. Much of this increase was due to the share of first-time buyers reaching 34 percent, for the highest rate seen in over four years. Although September inventory rose slightly to just over two million homes – or a timeline of 4.5 months -- it has fallen year-over-year for 16 consecutive months.
Wednesday, August 24, 2016
In its July monthly
meeting, the Federal Reserve Open Market Committee – which decides on interest
rate policy – left the door open to whether or not we’ll see another rate hike
in 2016. The good news is that the
expected impacts from Brexit have been largely subdued. In addition, the economy seems to be on a
more normal path, with both June and July showing monthly job growth of 255,000
to 287,000, and an official unemployment rate of 4.9 percent.
GDP, which was just 0.8 percent in the first quarter of the year, was initially reported to have risen to 1.2 percent by the second quarter. Moreover, in mid-August, the Federal Reserve Bank of Atlanta had estimated third-quarter GDP growth at 3.6 percent, and boosted its forecast for residential investment growth from 0.4 to 2.4 percent.
Inflation is also stable, with the Consumer Price Index flat in July but rising by just 0.8 percent over the previous 12 months. However, when subtracting out the more volatile indicators for food and energy, prices have risen by 2.2 percent over the previous year. With an annual inflation target of 2.0 percent, should job growth reports remain positive in the coming months, then the Federal Reserve may hike interest rates before the end of 2016. Still, not all sectors of the economy are feeling the inflation pinch, with the Producer Price Index falling 0.4 percent in July and still down 0.2 percent for the previous 12 months, which is also why a rate hike is not a given.
For now, consumers remain cautious, with The Conference Board’s Consumer Confidence holding steady at just over 97 on a 100-point scale in July after rising in June. This latest survey suggests that although the economy will continue expanding at a moderate pace, attitudes regarding the job market and personal incomes remain cautiously optimistic.
Builder confidence is also positive, rising by two points to 60 in August, in which anything over 50 is positive. The index measuring current sales rose two points to 65, while the index for sales expectations over the next six months rose one point to 67.
In the commercial real estate sector, CoStar’s value-weighted U.S. Composite Index, which focuses on the sales prices of higher-quality assets, advanced by 3.3 percent during the second quarter of 2016, while the equal-weighted U.S. Composite Index, which includes more sales of smaller properties, rose 2.1 percent. While the office, industrial and retail indices all rose by 1.9 percent and the multi-family index increased by a close 1.8 percent, by far the most improved sector was hospitality, rising 4.5 percent to within one percent of its former peak.
Looking closer at housing, sales of new single-family homes rose for the fifth straight month in July to surpass 650,000 annual units, for a notable jump of over 31 percent from July 2015 and reaching the highest pace of new home sales since October 2007. In addition, at this sales rate, existing inventory would take just 4.3 months to sell, versus 5.2 months a year earlier, and falling to the lowest inventory level since June 2013. For all of 2016, the NAHB is forecasting single-family home starts to rise by about 10 percent, as those in the multi-family sector level off. Nonetheless, future residential growth will continue to be hampered by shortages of labor and lots and higher regulatory costs.
In the existing home market, after four consecutive months of increases, July sales not only tumbled by 3.2 percent from June, but were also down 1.6 percent from the same month of 2015. NAR is blaming this on a lack of affordably priced inventory, especially for starter condominium homes. As proof of this, the Wells Fargo Home Opportunity Index fell to 62.0 percent in the second quarter of 2016, the lowest rate since the third quarter of 2014. Over the last year, inventory levels have fallen by 5.8 percent and have declined year-over-year for the last fourteen months. Consequently, with some buyers priced out of the market even at low interest rates, overall inventory levels would take 4.7 months to sell, up from 4.5 months in June.
Of course this demand for new supply is certainly good news for builders! Although July housing starts were up 5.6 percent year-on-year, building permits inched up only 0.9 percent for the same time period. Yet given the challenges facing the industry including regulations, labor shortages and the difficulty finding affordably priced land, lack of available housing supply may be with us for some time.
Monday, August 15, 2016
Confidence inched upward in early August due to more
favorable prospects for the overall economy offsetting a small pullback in
personal finances. Home buying has become particularly dependent on low
interest rates, with net references to low interest rates spontaneously
mentioned by 48%.
Builder confidence in the market for newly constructed
single-family homesin August rose two
points to 60 from a downwardly revised reading of 58 in July. The component
gauging current sales conditions rose two points to 65, while the index
charting sales expectations in the next six months increased one point to
Retail sales were unchanged in July, coming off a revised
0.8 percent increase in June. Retail sales in June were previously reported to
have increased 0.6 percent. Sales rose 2.3 percent from a year ago.
The Producer Price Index for final demand decreased 0.4
percent in July. On an unadjusted basis, the final demand index moved down 0.2
percent for the 12 months ended in July.
Thursday, August 11, 2016
U.S. job openings increased in June and layoffs dropped to their lowest in nearly two years as labor market conditions tightened further.
Friday, August 5, 2016
Total nonfarm payroll employment rose by 255,000 in July, and the unemployment rate was
unchanged at 4.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains
occurred in professional and business services, health care, and financial activities.
Employment in mining continued to trend down.