What I Saw Last Week
U.S. New Home Sales dropped 1.5% month-over-month in April to a seasonally adjusted annual rate of 662,000 – I had forecast a more modest drop to 677,000 – from a downwardly revised 672,000 (from 694,000) in March.
Sales rose 11.1% in the Northeast and the South was up by 0.3%; the Midwest saw no change and the West dropped by 7.9%. The median sales price rose 0.4% year-over-year to $312,400 while the average sales price increased 11.3% to $407,300.
Based on the current sales pace, the inventory of new homes for sale rose to 5.4-months’ supply, versus 5.3 months in March and 5.4 months a year-ago.
The takeaway from the report is that lower-priced homes ($399,999 or less) accounted for a smaller percentage of new homes sold in April (down to 65% from 70%) than the prior month, reflecting perhaps the lack of supply at more attractive price points for prospective buyers.
U.S. Existing Home Sales in April dropped 2.5% m/m to a seasonally adjusted annual rate of 5.46M units – I had forecast a drop to 5.57M – from 5.6M in March. Total sales were 1.4% lower than the same period a year ago.
The median existing home price for all housing types increased 5.3% to $257,900, which was the 74th straight month of year-over-year gains. The median existing single-family home price was measured at $259,900, up 5.5% from a year ago.
There wasn’t any monthly growth in existing home sales across regions with the Northeast down 4.4%; the Midwest was unchanged; the South was down 2.9%; and sales were 3.3% lower in the West.
Single-family home sales dropped 3% to a seasonally adjusted annual rate of 4.84M units and were 1.6% below the level seen a year ago.
Although it was pleasing to see the inventory of homes for sale at the end of April up by 9.8% to 1.8M units, it should be noted that this level is still 6.3% lower than the same period a year ago. Also of note is that the year-over-year inventory of existing homes for sale has now fallen for 35 consecutive months.
At the current sales pace, there are 4-month of supply versus 4.2 months a year ago and still below the 6-month supply typically associated with a balanced market.
The takeaway from the report remains the same: notable supply constraints continue to act as a drag on overall sales. The limited inventory — in concert with the high prices for available inventory — is crimping affordability, particularly for first-time buyers; moreover, all prospective buyers are going to feel added affordability pressures from rising mortgage rates.
The final Consumer Sentiment number for May was revised down from the early month level of 98.8 to 98.0. I had forecast no change.
The Current Economic Conditions Index dipped to 111.8 from the preliminary reading of 113.3. The final reading for April was 114.9. The Index of Consumer Expectations slipped to 89.1 from the preliminary reading of 89.5. The final reading for April was 88.4.
The takeaway from the report is that consumers expect smaller income gains than they did a month ago, or a year ago, despite thinking the unemployment rate will stabilize at its 18-year low of 3.9%.
What to Watch for This Week
The Case Shiller Index for March should show annualized home price growth of 6.5% – down from 6.8% in February.
Consumer Confidence in May is likely to have pulled back from the 128.7 level seen in April. Look for a drop to 127.5.
The second estimate for US GDP in Q1 should show that the economy expanded at the same 2.3% rate as previously reported.
I expect to see Income & Spending data for April both higher with both 0.3% higher month-over-month.
The NAR Pending Home Sales Index for April is likely to show signed contracts up by 0.7% from a 0.4% increase seen in March.
Non-Farm Payrolls in May should show the nation added 190,000 jobs in the month – up from the April figure of 164,000.
I anticipate that the Unemployment Rate will remain at 3.9%.
U.S. Construction Spending in April should have turned around from the 1.7% contraction seen the prior month. Look for it to have risen by 1.0%.