What I Saw Last Week

According to the Case Shiller Index, U.S. home prices rose more than anticipated in the month of February with the 20-city index up by 5.9% year-over-year.  I had forecast an increase of 5.8%.


Seattle, Portland, and Dallas reported the highest year-over-year gains among the 20 cities. In February, Seattle led the way with a 12.2% year-over-year price increase, followed by Portland with 9.7%. Dallas replaced Denver in the top three with an 8.8% increase. Fifteen cities reported greater price increases in the year ending February 2017 versus the year ending January 2017.

The low stock of existing homes for sale — currently about 3.8 months’ worth of supply at current sales rates — is bolstering the price increases across the board. Housing affordability has declined since 2012 as the pressure of higher prices has been a larger factor than stable to lower mortgage rates.

U.S. New Home Sales ran at a seasonally adjusted annual rate of 621,000 – I had forecast 590,000 – up 5.8% from the revised February rate of 587,000 (from 592,000)

New sales

March marked the highest sales pace since July 2016, and one of the highest sales paces since 2008.

The uptick in March was driven by a 25.8% increase in sales in the Northeast, which rebounded from a 24.4% decline in sales in January. The Midwest was the only region to experience a decline in sales (-4.5%), yet it was coming off a month in which sales surged 23.9% in February.

The median sales price of a new home increased 1.2% to $315,100 while the average sales price increased 5.6% to $388,200.  The key takeaway from the report is that demand for new homes was strong, notwithstanding higher price points from the same period a year ago.

Consumer Confidence dipped to 120.3 in April (I had called for a drop to 122.3) from a downwardly revised 124.9 (from 125.6) in March. Noticeably, the original March reading was the highest since the end of 2000.


The key takeaway from the report is that confidence remains at high levels and indicative of an expectation that the economy will continue to expand in the months ahead.

The NAR Pending Home Sales Index dropped 0.8% in March (I had forecast a 4.8% increase).

Pending Index

Home shoppers are out in droves this spring; however, competition is rife for the meager number of listings in affordable price ranges.

Regionally, the pending home sales index in the Northeast fell 2.9% for the month but is 1.8% higher than in March 2016. In the Midwest, the index declined 1.2% monthly and 2.4 percent annually. Sales in the South rose 1.2% monthly and are 3.9% above last March. Sales in the West fell 2.9% monthly and 2.7% annually.

According to the advance estimate from the BEA,  GDP in the first quarter of 2017 increased at a seasonally adjusted annual rate of 0.7% (I had forecast +1.1%).


The main drag on growth in the first quarter was the change in private inventories, which subtracted 0.93%. A downturn in government spending subtracted 0.30%.

There was some notable strength in non-residential and residential fixed investment. Combined those two areas contributed 1.62% to first quarter growth.

The key takeaway from the report, however, was that the growth in personal consumption expenditures (PCE) was decidedly weak, increasing just 0.3%, which was the weakest growth in more than seven years.

The final Consumer Sentiment number for April dropped from the early month estimate of 98.0 to 97.0.  I had forecast no change.


The Current Economic Conditions Index was revised to 112.7 from 115.2, down slightly from the final reading of 113.2 for March.  The Index of Consumer Expectations was revised up to 87.0 from 86.9, topping the final reading of 86.5 for March.

The key takeaway from the report is that consumer sentiment remains high notwithstanding partisan political views among consumers about the economic outlook.

What to Watch for This Week

Income & Spending data for March is likely to show incomes rising by 0.2% but spending remaining unchanged. Spending data was reflected in the first quarter GDP number so it should come as no surprise.

U.S. Construction Spending rose by 0.8% in February and the March numbers should show a modest contraction of 0.2%.

Businesses added a meager 98,000 new jobs in March and the April data should show Non-Farm Payrolls improving with an increase of 185,000 jobs.

Even with this growth in employment, I expect to see the Unemployment Rate notch back up to 4.6%.

Consumer Credit rose by $15.2B in February on the back of rising non-revolving loans.  Look for the March data to show further growth of $16B.