NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist
INDICATOR: November Existing Home Sales/October FHFA Home Prices
KEY DATA: Homes Sales: +5.9%; One-Family: +5.5%; Condos: +9.1%/FHFA Prices: +0.5%
IN A NUTSHELL: “The drum beat of better housing conditions just keeps getting stronger.”
WHAT IT MEANS: This is a broken record: The housing market is the leading light of the economy. Existing home sales surged in November. This is the highest pace in three years, when the federal government’s tax credits were about to end. Demand for both single-family and condos was strong while the increases were spread fairly evenly across the nation. The gain in the West was somewhat limited and that region remains the only laggard. The supply of homes on the market continues to fall and the limited availability is helping drive up prices. Over the year, median existing home prices are up over 9%. That gain was backed by another increase in the Federal Housing Finance Agency’s index. In October, the FHFA indicated that single-family home prices rose and over the year, they are up 5.6%. Since these are only conforming loans, it is not a surprise that they differ in magnitude. However, the trend is similar: The price increases are accelerating.
MARKETS AND FED POLICY IMPLICATIONS: Almost all the data released today were better than expected. Third quarter growth came in above 3%, creating a strong base for the current quarter. Housing sales and prices continue to rise and the dearth of supply should lead to even stronger price gains. That will only help the market and improve consumer confidence. The Philadelphia Federal Reserve Bank’s reading of manufacturing activity in the Mid Atlantic region jumped into positive territory as firms started shaking off the problems created by Sandy. The only negative was a drop in leading indicators but that should not surprise anyone as we know that corporations are preparing for the worst coming out of Washington. In other words, this economy is continuing to move forward despite every effort on the part of our elected “leaders” to prevent that from happening. This resilience is the key to any potential rebound next year. Leading the way will be housing but once corporate confidence returns, hiring and investment will follow.
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