Weekly Economic Review: December Existing Home Supply Down, Home Prices Up

Posted by Laine Smith on 1/22/16 12:37 PM

Topics: Economy

Global markets were extremely volatile this week due to U.S. economic data and concerns about slow economic growth in China. Mortgage rates ended the week with no change.

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Image courtesy of hywards at FreeDigitalPhotos.net

Oil prices hit their lowest level in a decade. As for inflation, the December U.S. consumer price index (CPI) revealed that the last month of 2015 had the second lowest annual rate of inflation in the last 50 years. The annual increase was 0.7 percent. The lowest rate of annual increase was in 2008; declining oil prices were also a main contributing factor then.

Lack of inflation stands as a policy risk for the Fed, as many FOMC members have been expressing doubts that inflation will move toward the target range. The Fed meets next Tuesday, January 26.

Existing home sales had a large recovery in December, up 14.7 percent following a disappointing November. The low amount of November closings are attributed to the new loan disclosures, TRID, that were implemented in October.

Supply of existing homes is a major concern for the December report. Total homes on the market fell to 1.79 million, a 3.9-month supply, from November’s 2.04 million. Low supply was positive for the median home price, up 1.9 percent to $224,100.

Last week in the economy:

  • Mortgage rates (the national average) held steady with no change.
  • The purchase index of MBA Mortgage Applications fell 2 percent following a drop in rates while refinance application surged 19 percent higher.
  • Initial jobless claims saw their second straight gain and third gain in the last four weeks. The January 16 reading was the highest since July.
  • The Housing Market Index shows builders are still optimistic, but are a little less though than the previous month. The index was down 2 points for January, which is attributed to weak first-time homebuyer traffic.
  • Housing starts and permits both fell back in December following an extremely strong November. Starts dipped by 2.5 percent and permits fell 3.9 percent. Year-over-year, starts are up 6.4 percent and permits are up 14.4 percent.
  • Despite stock market losses, the consumer comfort index only dipped 0.4 percent, following a week of gains. The index is only down 2-tenths from this time last year when the markets were also extremely volatile.

What's on the economic calendar for the week of January 25, 2016:

Tuesday: FHFA House Price Index and Consumer Confidence

Wednesday: MBA Mortgage Applications, New Home Sales and FOMC Meeting Announcement

Thursday: Jobless Claims, Pending Home Sales, and Bloomberg Consumer Comfort Index

Friday: GDP and Consumer Sentiment

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