Home Sales STILL Rising!!

Who would have thought, housing is the strongest part of the economic news for the week.  As of late we have been seeing various housing reports getting better and better, and this week was no exception.

New home sales rose a very solid 7.6 percent in May which significantly exceeded analyst’s expectation.  Sales came in at a higher-than-expected annual rate of 369,000 in May, well above the forecast for 350,000 and the best rate in more than 2 years. Regionally, May's strength includes the Northeast but is concentrated in the South which by itself makes up 55 percent of all sales.

What bodes well for the coming months in housing is that the surge of buying in May brought down the home supply to 4.7 months at the current sales rate which is the lowest since 2005.

The S&P Case-Shiller Home Value Index has demonstrated that home prices are stabilizing, a lot which has to do with the fact that competition from distressed properties and sales has been declining.  Case-Shiller's seasonally adjusted composite index for 20 of the nation's largest markets surged 0.7 percent. This is an unusually large gain, last exceeded in April 2010 and before that in August 2009. April's gain is also the third in a row which is the longest streak since early 2010. The latest report also includes a sharp upward revision to March, to plus 0.7 percent from an initial gain of 0.1 percent.

GDP for the 1^st quarter of 2012 grew at the same sluggish pace as previously believed. First quarter GDP growth posted a still slow 1.9 percent annualized pace, compared to the prior estimate of 1.9 percent and the fourth quarter pace of 3.0 percent, annualized. The third estimate matched market expectations for a 1.9 percent rise.

The stock market is set to finish June with the strongest showing in quite a while.  As Europe continues to remain a drag on the U.S. economy, week after week, one way or the other they find a way to stave off disaster.  The latest band aid for the Europe is another deal to recapitalize the banks.  This news has caused bond yields in Europe to drop to more affordable levels making it easier for banks to borrow money to stabilize them financially.

This week was a fairly light week for economic data and with the July 4^th holiday next week, other than the National Employment figures being released on Friday, next week will likely be uneventful as well.

JJ Mack