Economical Updates October 28, 2016

Behind The Headlines

The headline was hopeful, “New home sales rise 3.1% in September,” but you know what they say about devils and details.
New home sales were indeed up, but only because the August sales turned out to be even worse than first reported. Instead of the annual rate of 609,000 first announced, they were revised to 575,000. That made the September rate of 593,000 look pretty good.
The inventory of available new homes shrunk again as well, going from a 4.9-month supply in August to 4.8 months. The demand is apparently there; many of the homes that sold in September hadn’t yet had their foundations poured.
Pending sales were more encouraging. Lawrence Yun, Chief Economist for the National Association of Realtors (NAR) said that the number of home sale contracts signed in September indicates that “Buyer demand is holding up impressively well this fall.” NAR’s Pending Home Sales Index (PHSI) bounced back from a 2.5% loss in August to gain 1.5%. NAR said sales were especially robust in the West, rising by 4.7% month-over-month in that region.
Existing homes have inventory issues as well–NAR says there is only a 4.5-month supply out there and that supply has shrunk on an annual basis for 16 straight months. This is probably at least part of the reason that home prices continue to rise at a pretty good clip.
The S&P CoreLogic Case-Shiller National Home Price Index was up 5.2% on a year-over-year basis in August, a slightly higher gain than in July. Both the 10- and 20-City price measures rose a bit more than in July as well.
The Federal Housing Finance Agency (FHFA) reported even faster acceleration. Its Housing Price Index (HPI) was up 6.4% from August 2015 to August 2016 compared to annual appreciation of 5.8% in July.
Case-Shiller and FHFA both show the strongest price gains are in the West. Portland, Seattle, and Denver have been superstars on the former index for seven straight months and FHFA reported the Pacific and Mountain census divisions (along with the South Atlantic division) posted annual appreciation of well over 7 percent.
In a bit of unvarnished good news, Freddie Mac reports mortgage rates reversed last week’s increase, dropping 5 basis points to 3.47%.
FreddieMac 102816 | Greg Timms Blog