Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for December showing that home sales slowed with the seasonally adjusted national index dropping 3.5% since November while increasing 5.57% above the level seen in December 2010.
Meanwhile, the NARs chief economist Lawrence Yun suggests that the rise in contract activity still remains high compared with the past few years and that homebuyers are persistent even in light of notable contract failures.
"Even with a modest decline, the preceding two months of contract activity are the highest in the past four years outside of the homebuyer tax credit period, ... Contract failures remain an issue, reported by one-third of Realtors® over the past few months, but home buyers are not giving up."
The above chart shows the seasonally adjusted national pending home sales index along with the percent change on a year-over-year basis as well as the percent change from the peak set in 2005 (click for larger version).
Today, the Federal Reserve Bank of Richmond released their Survey of Manufacturing Activity for January showing that the composite index, the broadest measure of manufacturing activity, improved 9 points to a level of 12.
The most notable component measures also showed similar results with the new orders improving to 14.
The a chart plots the composite index with the red line marking a level of 0, or the threshold between increasing and declining activity.
Today, the National Association of Realtors (NAR) released their Existing Home Sales Report for December showing an increase in sales with total home sales climbing 5.0% since November and 3.6% above the level seen in December 2010.
Single family home sales increased 4.6% from November and rose 4.3% above the level seen in December 2010 while the median selling price declined 2.5% below the level seen in December 2010.
Inventory of single family homes declined 10.7% from November dropping 19.7% below the level seen in December 2010 which resulted in a monthly supply of 6.1 months.
The above chart (click for full-screen dynamic version) shows national existing single family home sales.
Today’s New Residential Construction Report showed that in December, both single family permits and starts increased from November with permits continuing to show tepid results when compared on a year-over-year basis while starts improved notably over the same period.
Single family housing permits, the most leading of indicators, increased 1.8% from last month to 444K single family units (SAAR), but declined 0.22% below the level seen in December 2010 and remaining an astonishing 75.31% below the peak in September 2005.
Single family housing starts increased 4.44% to 470K units (SAAR), and climbed 11.64% above the level seen in December 2010 but remaining a stunning 74.22% below the peak set in early 2006.
With the substantial headwinds of elevated unemployment, epic levels of foreclosure and delinquency, mounting bankruptcies, contracting consumer credit, and falling real wages, an overhang of inventory and still falling home prices, the environment for “organic” home sales remains weak and likely very fragile.
Today’s jobless claims report showed notable declines to both initial and continued unemployment claims as seasonally adjusted initial fell back below the closely watched 400K level.
Seasonally adjusted “initial” unemployment declined 50,000 to 352,000 claims from last week’s revised 402,000 claims while seasonally adjusted “continued” claims declined by 215,000 resulting in an “insured” unemployment rate of 2.7%.
Since the middle of 2008 though, two federal government sponsored “extended” unemployment benefit programs (the “extended benefits” and “EUC 2008” from recent legislation) have been picking up claimants that have fallen off of the traditional unemployment benefits rolls.
Currently there are some 3.56 million people receiving federal “extended” unemployment benefits.
Taken together with the latest 4.16 million people that are currently counted as receiving traditional continued unemployment benefits, there are 7.77 million people on state and federal unemployment rolls.
Today, the National Association of Home Builders (NAHB) released their latest Housing Market Index (HMI) showing that all measures increased in January with the composite HMI index climbing to 25, the highest level seen since mid-2007, while the "buyer traffic" index climbed to 21.
While all indicators made notable increases in January, it's important to note that conditions still remain distressed by historic standards.
The new home market will likely not resume any significant form of healthy function until the considerable overhang of inventory is cleared.
The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as the volume of both purchase and refinance applications.
The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.
The latest data is showing that the average rate for a 30 year fixed rate mortgage (from FHA and conforming GSE data) declined 5 basis points to 3.98% since last week while the purchase application volume surged 10.3% and the refinance application jumped a whopping 26.40% over the same period.
With rates trending ever lower, the economy seemingly near recession and the FOMC members becoming more dovish by the day, it will be interesting to see how far rates on the long end can decline. All things being equal, falling home prices, declining purchase applications and record low long lending rates all appear to indicate a deflationary for the macro-economy.
The above chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).
The Empire State Manufacturing Survey consists of a series of diffusion indices distilled from a monthly survey of New York regional manufacturing executives and seeks to identify trends across 22 different current and future manufacturing related activities.
Today’s report showed a notable improvement for both current and future assessments of manufacturing activity with the current activity index climbing to 13.48 while future activity jumped to 54.87.
Current prices paid increased to 26.37 while current new orders improved 13.7 and assessments of future new orders weakened slightly to 53.85.
Yesterday's early release of the Reuters/University of Michigan Survey of Consumers for January indicated improvement in consumer sentiment with a reading of 74.0 and falling just 0.27% below the level seen last year while one year inflation expectations rose slightly to 3.2%.
The Index of Consumer Expectations (a component of the Conference Board's Index of Leading Economic Indicators) rose to 68.4, and the Current Economic Conditions Index climbed to 82.6.
It's important to recognize that consumer sentiment has seriously eroded over the past few months with the current results remaining near levels not seen since 1980, a major indication that consumers are in the process of tightening even further on spending.
Today, the U.S. Census Bureau released its latest nominal read of retail sales showing a 0.1% increase from November and an increase of 6.5% on a year-over-year basis on an aggregate of all items including food, fuel and healthcare services.
Nominal "discretionary" retail sales including home furnishings, home garden and building materials, consumer electronics and department store sales increased 0.23% from November and increased 2.90% above the level seen in December 2010 while, adjusting for inflation, “real” discretionary retail sales declined 0.07% over the same period.
On a “nominal” basis, there had appeared to be “rough correlation” between strong home value appreciation and strong retail spending preceding the housing bust and an even stronger correlation when home values started to decline.
The following chart shows the year-over-year change to nominal discretionary retail sales and the year-over-year change to nominal the S&P/Case-Shiller Composite home price index since 1993 and since 2000.
As you can see there is, at the very least, a coincidental change to home values and consumer spending during the boom and then the bust, but as home values have continued to decline, retail spending has remained low but has not continued to consistently contract.
Looking at this chart (click for full-screen dynamic version), adjusted for inflation (CPI for retail sales, CPI “less shelter” for S&P/Case-Shiller Composite) the “rough correlation” between the year-over-year change to the “discretionary” retail sales series and the year-over-year S&P/Case-Shiller Composite series seems now even more significant.