Weekly Economic Review: Existing Home Inventory Drops to 17-Year Low

Posted by Laine Smith on 1/27/17 12:08 PM

Topics: Economy Mortgage Rates 2017 Home Prices

This week’s economic review includes existing home and new home sales data, which dropped in December, limited home inventory, rising mortgage rates and home price data.

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©iStockPhoto/kevinruss

Existing home sales are still being held back by inventory, according to the December Existing Home Sales report. Economists had predicted the December sales market would experience a 1.1 percent drop but monthly sales fell over double the consensus level at 2.8 percent. November’s report gained an upward revision.

According to the National Association of Realtors, supply fell to its lowest since at least 1999. Dropping 11 percent in the month, inventory now stands at a 3.6-month supply, down from 3.9 months in November.

Despite falling inventory, the median price of existing home sales was down 0.9 percent to $232,000. Year-over-year the median price is up just 4.0 percent.

According to the FHFA House Price Index, which cover single-family housing using data provided by Fannie Mae and Freddie Mac, home price growth was solid in November at plus 0.5 percent. Year-over-year this price index stands at plus 6.1 percent.

New home sales also experienced a steep drop in December, falling 10.4 percent in the month to a lower-than-expected rate of 536,000 against a consensus level of 593,000. The 3-month average of new home sales is down 12,000 to 568,000, making it the lowest reading since June. The sales rate, which had been booming in the double digits, now stands at minus 0.4 percent. A positive in the December report is supply, which has climbed 10.2 percent year-over-year and is now at a 5.8-month supply. The median new home sales price jumped 4.3 percent in the month to $322,500 with a year-over-year gain of nearly 8 percent.

This week in the economy:

  • After two weeks of declines, the 30-year fixed-rate average jumped back up to 4.19 percent with 0.5 points as of January 26, according to Freddie Mac.
  • Purchase applications jumped 6.0 percent in the week of January 20 to the highest level since June, according to MBA Mortgage Applications. Refinance applications rose just 0.2 percent from the previous week. Refinance shares of mortgage activity is now at its lowest since July 2015.
  • Initial jobless claims data, which is volatile following holiday weeks, rose 22,000 to 259,000, according to Bloomberg. The 4-week average still moved slightly downward to 245,500.
  • While still respectable, the Bloomberg Consumer Comfort Index was unchanged in the week of January 22 at a level of 45.2.
  • Real GDP managed a 1.9 percent annualized growth in the fourth quarter of 2016. Consensus levels were expecting a quarter-to-quarter change of 1.8 to 3.3 percent.
  • The Consumer Sentiment report remained strong for the month of January, rising 0.4 points to a level of 98.5. Forecasts for future income are at the highest level in a decade.

What’s on economic calendar for the week of January 30, 2017:

  • Monday – Pending Home Sales Index
  • Tuesday – Consumer Confidence, FOMC Meeting Begins
  • Wednesday – MBA Mortgage Applications, Gallup U.S. Job Creation Index, ADP Employment Report, FOMC Meeting Announcement
  • Thursday – Jobless Claims, Bloomberg Consumer Comfort Index
  • Friday – Employment Situation

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