What I Saw Last Week

U.S. New Home Sales in September dropped 5.5% to a seasonally adjusted annual rate of 553,000 – I had forecast an increase to 630,000.


That was the weakest pace since December 2016 and it followed on the heels of a sharp downward revision for August to 585,000 (from 629,000).

The median sales price of $320,000 was down 3.5% from the year-ago period. The average sales price of $377,200 was down 0.6% from the year-ago period

There was a 7.1 months’ supply of new homes based on the September sales pace. That is the highest supply level since March 2011.

The key takeaway from the report is that it underscores how demand is being impacted by rising mortgage rates. Median and average home prices were both down year-over-year, yet that didn’t seem to provide much of a lift for new home sales.

The NAR Pending Home Sales Index for September rose 0.5% – I had forecast a drop of 0.2%.


According to the Index, activity broke through in the Midwest and West, where, from August to September, the Index tracked up 1.2% and 4.5%, respectively. Compared to September 2017, however, the Index was lower, down 1.1% in the Midwest and 7.4% in the West.

Meanwhile, in the Northeast, the Index trickled down 0.4% from the month prior, and 2.7% below its level in September 2017. In the South, the Index tumbled 1.4% from the month prior, but was 3.3% above last year’s reading.

The takeaway from this report is that buyers are out there on the sidelines, waiting to jump in once more inventory becomes available and the price is right. When compared to 2000, when the housing market was considered very healthy, home sales figures were roughly equivalent, and the affordability conditions were much lower compared to now. So even though affordability has been falling recently, the demand for housing should remain steady.

The first take on U.S. growth in the third quarter of 2019 showed GDP rising by 3.5% – marginally above my forecast for 3.3%.


The key takeaway from the report is that real final sales of domestic product (which subtracts the change in private inventories) was up just 1.4% — the weakest growth rate since the fourth quarter of 2016. Additionally, with the largest group of U.S. tariffs hitting in September, we may well see slower growth in the 4th quarter.

The final Consumer Sentiment figure for October was 98.6, down slightly from the preliminary figure of 99.0 – I had forecast no change.


The Current Economic Conditions Index slipped to 113.1 from the preliminary reading of 114.4 while the Index of Consumer Expectations edged higher to 89.3 from the preliminary reading of 89.1.

The takeaway from the report is that consumer sentiment has not been unduly affected by the stock market sell-off or the jump in interest rates. The outlook for consumers is still rooted in feelings about job security.

What to Watch for This Week

Income & Spending data for September should indicate incomes rising by 0.4% and spending up by 0.5%.

Case Shiller Index numbers for August are likely to show the 20-City Index up by 5.9% year-over-year matching the July figure.

Consumer Confidence in October should be down from the September level of 138.4.  Look for it to come in at 135.8 as concerns over dropping stock prices factor in to the Index.

U.S. Construction Spending rose by 0.2% in August on the back of rising public construction spending. I expect to see the September data show total spending up by another 0.2%.

U.S. Non-Farm Payrolls in October should have risen by 190,000 following the September increase of 134,000.

The national Unemployment Rate in October should remain at 3.7%.