Housing Market is Steadily Increasing!

Signs of life in housing are increasing slightly.  The housing market has seen a slight recovery in certain areas.  Current sales of new homes are at their highest level since the start of the recovery according to the latest Housing Market Index.  There is not a direct correlation between this number and some of the numbers the government releases in their reports however positive news in new construction is always welcome.

Housing starts were not as upbeat based upon the headlines, however when you dig into the numbers, there are additional signs of life.  The negative side of the report related to the volatile multifamily report.  We have seen time and time again radical movements in the multifamily numbers.  Single family starts rose 3.2% which follows April’s increase of 4.0%.  Single family patterns reflect more about the average consumer sentiment and focus in housing.

Existing Home Sales continue to remain flat.  Many experts attribute this pattern to the fact that the unseasonably warm winter brought many purchasers into the market much earlier than normal.  Typically there is a significant jump in activity at this time of year however it is more than likely that the early action of purchasers is what is creating the lack of demand today.

Within the existing sales report there is good news.  Home prices appear to be firming up compared to the same time last year.  Median home prices are currently 7.9% higher than they were the same time last year.

The Mortgage Bankers Association reported a 9% drop in purchase activity for the prior week.  Some of it may be attributed to the slight increase in mortgage rates.  However what is more likely is a combination of the Memorial Day Holiday combined with many school years ending in the last 2 weeks keeping potential homebuyer occupied on other areas of their lives.

As expected the Fed left interest rates unchanged.  Once again the Fed did not say much of anything about launching another round of stimulus.  You may remember that I have written in the last two weeks how investors have been gambling on the belief that the Fed would announce stronger language about launching another program to try and get the economy moving.  Well… the Fed said nothing new.  They continue to reiterate that if they need to act, they will, however they have not indicated a timeline or benchmark that would cause them to take action.  Simply put, we have no idea when and if they will act nor what it will take to get them to act on providing more stimulus.

First Time Jobless Claims continue to remain in the upper three hundred thousand level.  Last week’s claims were 387,000 where as the prior week was revised to 389,000.  Essentially this is considered “unchanged”.  What is more concerning about the unemployment picture is that within the last 30 days, there are more than 300,000 less advertisements for jobs available.  This may be a sign that employers are becoming concerned about the direction of the economy and have decided to hold back on increasing payrolls.  This is the first month that we have seen this type of drop so reading too much into this report is premature.

JJ Mack