Weekly Economic Review: Home Sales Decline as Supply Drops to a Record Low

Posted by Laine Smith on 1/28/18 12:55 PM

Topics: Economy

In this week’s economic review, the 30-year average mortgage rate continued to climb, the U.S. economy ended 2017 on a strong note, and home sales fell in December.

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Home Prices

Home prices posted a strong 0.4 percent gain in November, according to FHFA’s House Price Index. Year-over-year, the index stands at plus 6.5 percent.

Existing Home Sales

Lack of supply was an evident issue in December’s existing home sales report. Sales fell 3.6 percent in the month to an annualized rate of 5.570 million, near low-end consensus levels.

December inventory fell a steep 11.4 percent, leaving just a 3.2-month supply in comparison to November’s 3.5-month supply. Out of 19 years of available home supply data, this is a record low.

The median price fell 0.2 percent to a $246,800, bringing the year-over-year to plus 5.8 percent.

New Home Sales

Though December sales were also down by 9.3 percent in the new home market, the annualized rate of 625,000 is the fourth highest of the expansion. Even more importantly, supply increased from November’s 4.9-month inventory to 5.7 months.

Prices were less volatile, edging up just 0.1 percent to a median of $335,400. Year-over-year new home price gains remain modest at just 2.6 percent.

GDP

The U.S. economy ended 2017 on a high note with growth of 2.6 percent. Though admirable, the headline increase doesn’t give credit to consumer spending which increased by 3.8 percent.

This week in the economy:

  • As of January 25th, the 30-year average fixed rate jumped 11 basis points to 4.15 percent with 0.6 points, according to Freddie Mac.
  • In the week of January 24th, home buyers continued to seek purchase applications despite higher mortgage rates. Mortgage application activity increased by 4.5 percent and refinances increased 1 percent.
  • In the week of January 20th, initial jobless claims increased but remain low and favorable after a steep drop in the week prior. The 4-week average is down 3,500 to a level of 240,000.

The economic calendar for the week of January 29th, 2018:

  • Tuesday – Consumer Confidence, S&P Corelogic Case-Shiller Home Price Index
  • Wednesday – MBA Mortgage Applications, ADP Employment Report, Pending Home Sales Index, FOMC Meeting Announcement
  • Thursday – Jobless Claims, Bloomberg Consumer Comfort Index
  • Friday – Employment Situation, Consumer Sentiment

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