Weekly Economic Review: Pending Home Sales Continue Their 3-Month Decline

Posted by Laine Smith on 7/2/17 10:00 AM

Topics: Economy

In this week’s economic review, pending home sales slumped, consumer confidence remains unusually high, and first quarter GDP gained a much-needed upward revision.

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Consumer Confidence

Unusually high consumer confidence continued in June with the index surpassing high-end expectations by 2 points, standing at a level of 118.9. The current conditions component jumped 5.7 points to 146.3 and is near a 16-year high. Though still strong, the expectations component fell back 2.3 points to a level of 110.6.

Home Prices

The S&P Corelogic Case-Shiller home price index, which tracks monthly changes in the value of real estate in 20 U.S. metros, lost some of its steam in April. March’s price gains were revised to +0.5 percent from 0.9 percent and April brought in an undersized gain of 0.3 percent. Year-over-year, the index fell back 2 tenths to 5.7 percent.

Pending Home Sales

Though closings in May picked up amidst several negative reports for the spring housing market, pending home sales continued their 3-month-long slowdown. Initial contract signings were down 0.8 percent in May versus expectations of a 0.5 percent gain. Though final sales don’t always mirror the pending sales index, the drop does foreshadow a deceleration for home sales in June.

GDP

The third and final reading of 2017’s first quarter GDP had a much-needed upward revision. The gain of 0.2 percent shows the economy slowed less sharply than initially estimated, but the 1.4 percent annual rate is still the slowest growth since Q2 of 2016.

The revision was largely boosted by consumer spending, which increased at a 1.1 percent pace instead of the previously reported 0.6 percent. Again, the revised rate of consumer spending growth is still at its slowest rate in the past four years, reports CNBC.

Consumer Sentiment

Though the index regained some ground from the mid-month reading, the final consumer sentiment reading for June stood at 95.1, down two full points from May. The current conditions component, though, increased 0.7 points, which points to a rise in consumer spending in June.

Inflation expectations were a large weakness of the month’s report with 1-year expectations holding steady at a very low 2.6 percent and 5-year expectations dropping to 2.5 percent.

This week in the economy:

  • The average 30-year fixed-rate fell 2 basis points as of June 29th, landing at 3.88% with 0.5 points, according to Freddie Mac.
  • Purchase applications fell a seasonally adjusted 4 percent in the week of June 23. The unadjusted purchase index is still strong at 8 percent above the level it was a year ago. Refinance applications decreased 9 percent, dropping the refinance share of mortgage activity by 1.0 percent, according to MBA Mortgage Applications.
  • Initial jobless claims held steady in the week of June 24 with a slight increase of 2,000, according to Bloomberg. The 4-week average, though, nudged lower to 242,250.
  • The Bloomberg Consumer Comfort Index dropped sharply in the week of June 25, landing at 48.6, which is the lowest reading since February.

The economic calendar for the week of July 3rd, 2017:

  • Monday – Gallup US Consumer Spending Measure, Construction Spending
  • Tuesday Markets Closed
  • Wednesday – MBA Mortgage Applications, Gallup US Job Creation Index, FOMC Minutes
  • Thursday – ADP Employment Report, Jobless Claims, Bloomberg Consumer Comfort Index
  • Friday – Employment Situation

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