What I Saw Last Week

U.S. New Home Sales in April were at a seasonally adjusted annual rate of 569,000 – down 11.4% from the upwardly revised March rate of 642,000 (from 621,000) – which was below my forecast for a drop to 575,000.

New sales

Taking into account the revisions for just the prior five months, there were 58,000 more new home sales between November and March than previously thought.

The downturn in new home sales in April was paced by the West region, which saw a 26.3% month-over-month drop in new home sales. Every region, though, saw a monthly decline: Northeast (-7.5%); Midwest (-13.1%); and South (-4.0%).

The median price of a new home declined 3.8% year-over-year to $309,200 while the average sales price dropped 3.1% to $368,300.

The takeaway from the report is that upward revisions to prior months more than made up for the shortfall in April relative to the consensus estimate, which is to say the April report is not as disappointing as it appears to be at first blush.

U.S. Existing Home Sales in April were at a seasonally adjusted annual rate of 5.57M, down 2.3% from a downwardly revised 5.7M (from 5.71M) in March and below my forecast for a drop to 5.65M.

Existing sales

Although it was good to see total housing inventory up 7.2% in April to 1.93M existing homes, we are still 9.0% below the same period a year ago, which marked the 23rd consecutive year-over-year decline.

The median existing-home price for all housing types increased 6.0% to $244,800, which was the 62nd straight month of year-over-year gains. The median price for existing single-family homes rose 6.1% to $246,100.

All-cash sales fell to 21% of transactions versus 23% in March and 24% a year ago, reflecting most likely the affordability constraint of high prices.

The median number of days a home was on the market fell to a new low of 29 days, down from 39 days a year ago.

The key takeaway from the report remains the same: existing home sales are being impeded by a lack of affordable supply, particularly in the lower- and mid-market price range.

The second estimate for US GDP revealed a seasonally adjusted annual growth rate of 1.2% which was better than my forecast for a more modest increase to 0.8% from the initial 0.7% first estimate.

Existing sales

The upward revision was attributed to increases in non-residential fixed investment and personal consumption expenditures which were larger than previously estimated and drops in state and local government spending being smaller than previously estimated.

The takeaway from the report is that the revision moved in the right direction, which will aid in tempering concerns about the slowdown when pitted against some otherwise rosy forecasts for the second quarter (Atlanta Fed GDPNow model at 4.1%) that should produce a more encouraging average for the first half of 2017.

The final Consumer Sentiment figure for May was revised slightly lower to 97.1 from the preliminary reading of 97.7. I had forecast a drop to 97.5.

Sentiment

The Current Economic Conditions Index was revised to 111.7 from the preliminary reading of 112.7. The final reading for April was 112.7.  The Index of Consumer Expectations was revised to 87.7 from the preliminary reading of 88.1. The final reading for April was 87.0.

The key takeaway from the report is that consumer sentiment levels continue to hover at post-election highs despite a politically partisan divide on the economic outlook.

What to Watch for This Week

Income & Spending data for April is likely to show both up by 0.4%.

Consumer Confidence in May should drop from 120.3 to 119.5. I am not worried as it is still at pre-recession levels.

The NAR Pending Home Sales Index for April should show a turnaround from the 0.8% contraction seen the prior month.  Look for an increase of 0.8%.

U.S. Construction Spending dropped by 0.2% in March and the April numbers should show an increase of 0.5% as residential construction picks up a little.

U.S. Non-Farm Payrolls rose by 211,000 jobs in April and the May figure should come in at a more modest 185,000.

The U.S. Unemployment Rate for May will remain at 4.4%.

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