What I Saw Last Week
U.S. Existing Home Sales rose 3.3% in January to an annual rate of 5.69M units. (I was expecting a less robust increase of 1.8% to an annual rate of 5.57M units.) Single-family home sales jumped 2.6% to a seasonally adjusted annual rate of 5.04M units.
The median existing-home price for all housing types increased 7.1% to $228,900, marking the 59th consecutive month of year-over-year gains. The median existing single-family home price increased 7.3% year-over-year to $230,400.
Total housing inventory of 1.69 million existing homes available for sale was 7.1% lower than a year ago, marking the 20th straight month of a year-over-year decline. There is a 3.6-month supply of unsold inventory at the current sales pace, which is unchanged from December and the lowest level since January 2005.
The key takeaway from the report is that high prices and limited inventory continue to compress the affordability factor for prospective buyers, and have prevented existing home sales from being even stronger.
The final Consumer Sentiment number for February was revised up to 96.3 from 95.7. I had expected a more modest increase to 95.8.
The Current Economic Conditions Index was revised up to 111.5 (from 111.2) versus the final reading of 111.3 for January. The Index of Consumer Expectations was revised up to 86.5 (from 85.7) versus the final reading of 90.3 for January.
The key takeaway from the report is that overall consumer confidence is high, yet there are clear splits along party lines with respect to the economic outlook. That understanding, it was noted, creates an expectation that there will be greater volatility and discretionary spending differences across subgroups.
Following a disappointing December, U.S. New Home Sales rebounded in January to a seasonally adjusted annual rate of 555,000 units. I had forecast an increase to 565,000. That was a bit disappointing relative to my estimate, yet it was 3.7% above the December sales rate and 5.5% higher than seen a year ago.
The median sales price increased 7.5% year-over-year to $312,900, while the average sales price slipped 1.3% to $360,900.
New home sales were up in all regions month-over-month, with the exception of the West (-4.4%), which might have been impacted by the inclement weather in California.
At the current sales pace, there was a 5.7-months’ supply of new homes for sale at the end of January, which is unchanged from December.
The takeaway from the report is that high prices continue to impede stronger sales activity at the lower end of the new home market. That point is borne out in the fact that homes priced $299,999 or less accounted for 44% of new homes sold in January 2017 versus 53% in January 2016.
What to Watch for This Week
The NAR Pending Home Sales Index for January will likely show a drop of 3% on the back of very low inventory levels.
The second estimate for GDP in the final quarter of 2016 should be revised up from the initial estimate of 1.9%. I am looking for growth of 2.1%.
Consumer Confidence in February is likely to pull back just a little. Expect to see it drop from 111.8 to 111.5.
Income & Spending in January will be mixed with incomes up by 0.4% and spending up by 0.3%.
U.S. Construction Spending in January should turnaround after having contracted by 0.2% in December. Look for an expansion of 0.6%.