Tags: Housing | Market | home | sales

Housing Market Might Still Improve Despite Softer Sales

Thursday, 19 Jul 2012 11:28 AM

INDICATOR: June Existing Home Sales/Unemployment Claims

KEY DATA: Sales: Down 5.4 percent; Median Prices (Year-over-Year): Up 7.9 percent/Unemployment Claims: 386,000 (up 34,000)

IN A NUTSHELL: “Softer homes sales are a disappointment but rising prices hold out hope that the market will improve in the future.”

WHAT IT MEANS: Housing has looked a lot better over the past few months but that progress seemed to slow in June. Surprisingly, existing home sales slumped as the demand for single-family and condo units tanked. This occurred despite a 30-year fixed mortgage rate that hit its lowest level in the 41-year history of the survey. A double-digit decline in the Northeast led the way but there was also a major falloff in the West as well. Sales eased by less in the South and Midwest.

While home purchases were falling, the number of homes on the market also dropped. The supply of distressed homes is declining and that may be suppressing sales. On the other hand, prices are really beginning to firm. That is good news as it means equity is rising and people will have more money to spend if they want to move. Also, if it becomes clear that the bottom in prices has been reached, those who are on the fence will start jumping off and that will lead to rising sales.

In a separate report, weekly unemployment claims surged. Don’t get too excited about this. Last week when they declined sharply, I warned this was likely a seasonal-adjustment issue caused by a week that contained July 4th and changing patterns of vehicle-maker layoffs. That makes the weekly numbers questionable. Looking at the more reasonable four-week moving average, the level is consistent with job growth a little higher than we have been seeing but not particularly great.

MARKETS AND FED POLICY IMPLICATIONS: The economy continues to move forward but there are no signs of growth gaining any traction. Clearly, the D.C. disaster being created by the Washington Wackos is depressing business confidence. Should any executive who is remotely sane aggressively hire or invest if there is no way to know what will happen in six months? No!

While there are real issues out there, such as the European debt crisis, what seems to be the overarching factor driving business decisions is the fear of a fiscal fiasco.

Gridlock is no longer just a political game: It is having real economic effects. Until business leaders can plan with more certainty, there is little chance the economy can accelerate to a solid pace. There is enough forward momentum to sustain us through the rest of the year but we will probably have to wait until next year before strong growth could appear.

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Thursday, 19 Jul 2012 11:28 AM
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