Weekly Economic Review: Existing Home Sales Fall, Home Prices Up

Posted by Laine Smith on 9/23/16 10:26 AM

Topics: Economy

The biggest economic news this week included the Federal Reserve’s decision on increasing the federal funds interest rate, as well as housing market news.

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Image courtesy of ddpavumba at FreeDigitalPhotos.net

The Federal Reserve delayed plans to raise interest rates on Wednesday, due to mixed economic reports. In a 7-3 FOMC vote, the committee voted to hold the federal funds interest rate between 0.25% and 0.50% instead of the proposed 0.50% to 0.75%, but a rate hike is still on the table before the end of the year.

“We judged that the case for an increase has strengthened but decided for the time being to wait,” Fed Chair Janet Yellen said in a press conference on Wednesday. “The economy has a little more room to run.”

Existing home sales disappointed in August, falling 0.9 percent to an annualized rate of 5.33 million units, the second-lowest pace of the year. July’s existing home sales were also revised lower. According to the National Association of Realtors chief economist, Lawrence Yun, the reason for the descent continues to be “lack of inventory choices and prices rising way too fast”.

With the sales pace in August, inventory stood at a 4.6-month supply, which is half a month lower than this time last year. Year-over-year the median home price is up 5.1 percent to $240,200.

The July FHFA House Price Index increased a solid 0.5 percent following a 0.3 percent revised gain in June. Year-over-year this index has been trending below the 6 percent line, but July’s report brought the index back to 5.8 percent. All nine sectors posted price gains.

This week in the economy:

  • The 30-year fixed-rate average fell to 3.48 percent, according to Freddie Mac. This follows last week’s average, which reached a post-Brexit high.
  • Housing starts and permits fell in August. Starts fell a steep 5.4 percent while permits dropped 0.4 percent.
  • Following a bump in rates last week, the purchase application index of MBA Mortgage Applications fell a seasonally adjusted 7 percent in the week of September 16. Year-over-year growth declined to 3 percent. The refinancing sector as experienced a similar sized drop, falling 8 percent to the lowest level since June.
  • Initial Jobless Claims fell 8,000 to 252,000 in the week of September 17. This is also the sample week for the monthly employment report, which is 10,000 below August’s sample. The 4-week average is down 6,750 to 258,500.
  • The Bloomberg Consumer Comfort Index fell another 0.9 points in the September 18 week to 41.3. This followed a near 2-point drop from 44.0 the week prior. The dropping index indicates lowering expectations of the labor market.

What’s on economic calendar for the week of September 26, 2016:

  • Monday – New Home Sales
  • Tuesday – Consumer Confidence
  • Wednesday – MBA Mortgage Applications
  • Thursday – Jobless Claims, Bloomberg Consumer Comfort Index, GDP, Pending Home Sales Index

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