The Housing Chronicles Blog

Wednesday, July 19, 2017

June building permits rebounded 7.4 percent from May, up 5.1 percent year-on-year

Privately-owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 1,254,000. This is 7.4 percent above the revised May rate of 1,168,000 and is 5.1 percent above the June 2016 rate of 1,193,000.


June housing starts rebounded 8.3 percent from May, up 2.1 percent year-on-year

Privately-owned housing starts in June were at a seasonally adjusted annual rate of 1,215,000. This is 8.3 percent above the revised May estimate of 1,122,000 and is 2.1 percent above the June 2016 rate of 1,190,000.


Tuesday, July 18, 2017

Builder confidence dips two points to 64 as lumber prices take a toll

Builder confidence in the market for newly-built single-family homes slipped two points in July to a level of 64 from a downwardly revised June reading on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). It is the lowest reading since November 2016. 


Second Quarter 2017 Economic Update: Slow, Steady Growth as Expansion Continues

Whether due to an actual “Trump bump” or other factors, so far the data is showing the second quarter of 2017 to be stronger than the first on multiple fronts.  Despite its relative age – which in another two years would be the longest recovery on record – the current expansion is still showing signs of life ahead.

According to the Federal Reserve’s Beige Book, the pace of recent growth has ranged from slight to modest, although there has been a mixed message on consumer spending, especially for auto sales, which were down three percent between the first and second quarters of 2017.

Still, this dip was reportedly partly due to automakers holding back on fleet sales to rental car companies and government agencies in order to help prop up brand values.

GDP growth, which averaged just 1.6 percent in 2016, did dip to 1.4 percent in the final estimate for the first quarter of 2017.  However, as of mid-July, analysts were projecting second quarter 2017 growth to rise to 2.4 percent due to improvements in construction spending, a rebounding manufacturing sector and continuing pent-up demand for housing.

Job growth averaged nearly 194,000 new positions per month in the second quarter, up substantially from under 170,000 in both the previous quarter as well as the same quarter of 2016, resulting in a June unemployment rate of 4.4 percent.  Labor markets continued to tighten across a wide spectrum of both low- and high-skilled positions, especially in construction and information technology.

However, as has been reported in the past, a wider range of industries are also reporting difficulty in finding qualified workers even as the expansion reaches into the furthest corners of the economy, including teenagers.  This shortage has certainly had some benefits for employees, with rising wage pressures for both low- and high-skilled positions prompting annual increases averaging about 2.5 percent.

Due in part to this relatively minor wage pressure, overall inflation remains low, with the Consumer Price Index (less food and energy) rising by 1.7 percent for the year ending in June 2017, or below the 2.0 percent target rate preferred by the Federal Reserve.  The Producer Price Index was slightly higher for the same period, rising by 2.0 percent for final demand minus more volatile indices for food, energy and trade services.

Looking next at consumer confidence, although the University of Michigan’s Consumer Sentiment Survey had been on a high plateau since last November, preliminary results for July were showing a split between future expectations – which have fallen sharply since their January 2017 peak – and current economic conditions, which have since rebounded to their March 2017 peak.  Moreover, given the small June dip in the Small Business Optimism Index, it’s possible that expectations for prolonged GDP growth rates of three percent in the future have softened, and what we’re likely to see is an annual growth rate of just above two percent for 2017.

Builder confidence remained bullish at a reading of 67 in June, and while the average for total construction spending in April and May of 2017 was down slightly from the first quarter of 2017, residential spending was up by one percent.  Even better, when compared against the second quarter of 2016, average residential construction spending in April and May was up by ten percent.

Although this extra spending did not show up meaningfully in the field during April or May, it certainly did in June, with both starts and permits rebounding sharply from May. In addition, year-on-year housing starts and permits for June were up by 2.1 percent and 5.1 percent, respectively.

New home sales, however, were up by over 11 percent during the same time periods to an annual rate of 610,000 units, while median new home prices rose to nearly $346,000.  At May’s sales rate, existing inventory would take 5.3 months to sell, up slightly from 5.2 months a year earlier.

For existing homes, the biggest challenge remains available inventory, with the pending home sales index dipping in both April and May from earlier in the year as the median sale price rose to $247,600.  This level marks a new peak, and is up 5.8 percent year-on-year.

Closed sales averaged 5.59 million in April and May of 2017, down 0.53 percent from the first quarter but up over four percent from the second quarter of 2016.  At current sales rates, inventory at the end of May would take 4.2 months to sell, down from 4.7 months a year earlier.

Monday, July 17, 2017

Business inventories rebounded sharply in May as sales recorded biggest drop in 10 months

U.S. business inventories rebounded 0.3 percent in May as sales recorded their biggest drop in 10 months, falling by 0.2 percent.


Consumer sentiment mixed in early July reading

Confidence in future economic prospects continued to slide in early July, with the Expectations Index now 10.1 index points below its January 2017 peak. In contrast, consumers' assessments of current economic conditions regained the March 2017 peak, the highest level since the July 2005 survey. Overall, the recent data follow the same pattern repeatedly recorded around past cyclical peaks: expectations start to post significant declines while assessments of current economic conditions continue to reach new peaks.


Friday, July 14, 2017

June retail sales fell 0.2 percent

June retail sales fell 0.2 percent, weighed down by declines in receipts at service stations, clothing stores and supermarkets. Americans also cut back on spending at restaurants and bars, as well as on hobbies. This decline, the second in two months, could temper expectations of strong acceleration in economic growth in the second quarter.


CPI flat in June, up 1.6 percent over past 12 months

The Consumer Price Index for All Urban Consumers was unchanged in June, but has risen 1.6 percent over the past 12 months. The index for all items less food and energy rose 0.1 percent in June, its third straight such increase, and is up 1.7 percent year-on-year.


Tuesday, July 11, 2017

Job openings fell 5.0 percent in May, but hires rose 8.5 percent

The number of job openings decreased 5.0 percent to 5.7 million on the last business day of May. Over the month, hires increased 8.5 percent to 5.5 million and separations increased 5.0 percent to 5.3 million.


June Small Business Optimism Index fell 0.9 points, little euphoria for rest of 2017

The Index of Small Business Optimism fell 0.9 points to 103.6, but sustained the surge in optimism that started the day after the election. The Index peaked at 105.9 in January and has dropped 2.3 points to date, no doubt in part due to the mess in Washington, D.C.

Progress is being made, but poorly communicated, and the biggest issues, healthcare and tax reform remain stuck in the bowels of Washington politics. Economic growth in the first half of this year will be about the same as we have experienced for the past three or four years, no real progress. There isn’t much euphoria in the outlook for the second half of the year.


Monday, July 10, 2017

Consumer credit use expanded in May at fastest rate in seven months

Consumer credit expanded in May at 5.8 percent, or the fastest rate in seven months.  This could be a sign that strong levels of confidence will lead to growth in consumption.The monthly growth of consumer credit often seesaws, but the first quarter’s 4.8% growth was the slowest quarterly expansion in more than six years.


Labor Market Conditions Index rose 1.5 in June, up for 13th straight month

The US Labor Market Conditions Index (LMCI) registered an increase of 1.5 for June following a revised increase of 3.3 for the previous month. The index has increased for the last 13 months.


Friday, July 7, 2017

Job growth rebounded strongly to 222,000 in June, unemployment rate ticks up slightly to 4.4 percent

Total nonfarm payroll employment increased by 222,000 in June, and the unemployment rate rose slightly to 4.4 percent. Employment increased in health care, social assistance, financial activities, and mining.  This rate of job growth compares to 152,000 in May and 297,000 in June of 2016.


Thursday, July 6, 2017

ISM: Service sector economy index rose slightly in June

The NMI registered 57.4 percent in June, which is 0.5 percentage point higher than the May reading of 56.9 percent. This represents continued growth in the non-manufacturing sector at a slightly faster rate. The majority of respondents’ comments are positive about business conditions and the overall economy.


IHS Markit: Services Business Activity Index rose for third straight month in June

The seasonally adjusted IHS Markit U.S. Services Business Activity Index registered 54.2 in June, up from 53.6 in May. This signalled a third month of accelerated growth in business activity among US service providers. Panellists linked growth to increased new orders and strong client demand. Overall, activity during the second quarter expanded at a solid pace that was only fractionally softer than that seen in the first quarter.