November Pending Home Sales/Weekly Unemployment Claims

NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist

INDICATOR: November Pending Home Sales/Weekly Unemployment Claims
KEY DATA: Pending Sales: +7.3%/Weekly Claims: 381,000 (up 15,000)
IN A NUTSHELL: “Most housing reports are looking up but prices are still in the dumps.”

WHAT IT MEANS: It is hard to get really strong growth if home construction remains weak, so any good news about that sector should be trumpeted. So here is today’s blast: Housing sales are beginning to climb. The National Association of Realtors reported that pending home sales, which are contract signings, jumped in November to the highest level since April 2010. Since that was when the government’s “first time, long time” buyers’ incentives were in place, it looks like we are now in the midst of a real, not policy-hyped recovery. Improvement was seen in all regions with the West and Northeast leading the way.
In a separate report, unemployment claims jumped last week. That was expected though the rise was somewhat more that predicted. Still, the trend is down as the four week moving average fell fairly sharply. It is now at a level that tends to signal declining unemployment rates.

MARKETS AND FED POLICY IMPLICATIONS: Most housing data have been coming in better than expected and that is an indication that the log jam is beginning to break. The jump in pending home sales should lead to a further rise in sales over the next few months. With affordability at a record high, if we can only make it a little easier to get a mortgage we just might see the sector show some real strength. Unfortunately, the huge number of distressed houses overhanging the market will continue to put downward pressure on prices and limit the uptick in home construction. Still, this report adds to the belief that the weakest link in the economy, housing, is starting to come out of it.

Next week is a big one as we get the December jobs report on Friday. While the rise in the claims number is a warning that the labor market is still not strong, there are real hopes the payroll numbers will be quite solid. The bigger question is the unemployment rate, which gapped down in November. A modest rise, which is expected, would be a positive sign that conditions are firming and that seems to be the message coming from the claims numbers. So we are ending the year on an up note and I want to wish everyone a

HAPPY NEW YEAR
RE/MAX Connection Realtors disclaimer:
RE/MAX Connection Realtors are not licensed financial advisors, and are not providing any financial advice, you should consult with a licensed financial advisor prior to making any financial decisions. RE/MAX Connection Realtors are only providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.
Our company accepts no liability for the content of this email/blog, or for the consequences of any actions taken on the basis of the information provided. Any views or opinions presented in this email/blog are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this email and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this email.
RE/MAX Connection Realtors, 1000 East Lincoln Drive, Suite 2, Marlton, NJ 08053 www.goconnectionnj.com

November New Home Sales

NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist

INDICATOR: November New Home Sales
KEY DATA: Sales: 315,000 (up 1.6%); Nov ’10-Nov ‘11: +9.8%

IN A NUTSHELL: “The choices may be limited but the sale of new homes is moving up anyway.”

WHAT IT MEANS: After falling apart in the summer of our discontented Congress, new home sales have been on a steady upward climb. The November pace was just about at its highest level this year. The October number was revised upward and if that happens with November, we could see the rate break that high. Still, the level is ridiculously low and is about one-quarter the pace hit at the peak of the boom. The current sales pace needs to more than double before we can say that demand is decent. With so many distressed homes on the market, developers are “building down”, constructing smaller homes so the price continues to fall. At the same time, though, the supply is being kept under control. Indeed, the number of homes for sale hit the lowest level in the forty nine year history of the data.

MARKETS AND FED POLICY IMPLICATIONS: The recovery in the housing market is under way but it is also glacial. There is not much hope for the new construction segment of the market as long as the overhang of distressed homes remains so high. Still, up is better than down and the remaining builders are probably seeing better sales, at least compared to last year. In any event, it’s time to do some food shopping for the weekend so let me say to all:
Happy Holidays
RE/MAX Connection Realtors disclaimer:
RE/MAX Connection Realtors are not licensed financial advisors, and are not providing any financial advice, you should consult with a licensed financial advisor prior to making any financial decisions. RE/MAX Connection Realtors are only providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.
Our company accepts no liability for the content of this email/blog, or for the consequences of any actions taken on the basis of the information provided. Any views or opinions presented in this email/blog are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this email and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this email.
RE/MAX Connection Realtors, 1000 East Lincoln Drive, Suite 2, Marlton, NJ 08053 www.goconnectionnj.com

August New Home Sales

NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist

INDICATOR: August New Home Sales
KEY DATA: Sales: 295,000 unit annualized (down 2.3%): Median Prices (8 ’10-8 ’11): -7.7%

IN A NUTSHELL: “Builders are not building, supply is falling, distressed homes are too cheaply priced and it is difficult to get a mortgage and people are surprised that housing sales are going nowhere?”

WHAT IT MEANS: It would be nice if housing sales pick up but it didn’t happen in August, at least for new homes. Exiting house sales did improve and that is indeed the issue for builders. With so many distressed houses on the market selling for such low costs, frequently below replacement cost, it is extremely difficult for developers to compete. To do that, they have to down sell and that is what is happening. Forty seven percent of the newly built homes sold went for less than $200,000. The sales decline in August was propelled by a sharp cut back in the Northeast and West and a more moderate decline in the South. The Midwest posted a solid increase. Prices are falling but that probably reflects the need to build smaller, less luxurious and less costly homes in order to match the homes that are on the market.

MARKETS AND FED POLICY IMPLICATIONS: The new home market is in the dumps and there is little reason to think it can right itself anytime soon. The problems are huge: Distressed houses are selling for prices that are at times impossible to match, appraisals are difficult because comparables are often distressed houses, many households don’t have much or equity any left in their homes so they cannot trade up or down to a new house and financial institutions are cautious in their lending, partly due to regulatory issues. We are going to have to get used to a slowly improving market at best. That does not bode well for the economy or jobs as this sector generates so many new positions. Indeed, the housing and credit issues seen here are a clear indicator of why this recovery always was going to be and for a while will continue to be disappointing. Anyone who says we can have a strong recovery without housing is missing the point. But we can have a recovery anyway; it’s just that it will not live up to hopes or expectations. Since it is doubtful the overhang of distressed houses will be alleviated anytime soon and housing construction will not soar until that happens, we need to get used to what the economy is capable of and that, unfortunately, is only moderate growth.
RE/MAX Connection Realtors disclaimer:
RE/MAX Connection Realtors are not licensed financial advisors, and are not providing any financial advice, you should consult with a licensed financial advisor prior to making any financial decisions. RE/MAX Connection Realtors are only providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.
Our company accepts no liability for the content of this email/blog, or for the consequences of any actions taken on the basis of the information provided. Any views or opinions presented in this email/blog are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this email and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this email.
RE/MAX Connection Realtors, 1000 East Lincoln Drive, Suite 2, Marlton, NJ 08053 www.goconnectionnj.com

March Existing Home Sales

NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist

INDICATOR: March Existing Home Sales
KEY DATA: Sales: +3.7%; 1-Family: +4.0%; Condos: +1.6%: Median Prices (Year-over-Year): -5.9%

IN A NUTSHELL: “There are some signs of life in the housing market with a lot of it coming from the recycling of distressed homes.”

WHAT IT MEANS: After seeing that new home sales improved, everyone was expecting a solid increase in existing home demand. The National Association of Realtors reported that sales of existing houses did rise a decent amount in March. However, the level of sales is still quite depressed and was off fairly sharply from the March 2010 sales pace. Of course, the government incentives were still in the market at that time but much of the sales burst occurred later in the spring. Still, conditions are getting better as the improvement was spread across most of the nation with only the West posting a modest decline. Investors continue to drive the market and were about 22% of the purchasers in March, up from 19% a year ago. They love those cheap distressed homes, which now make up 40% of the market. Given the tight lending standards cash buyers are more than welcome. To get a Fannie or Freddie loan (which are the only games in town) a borrower has to have a credit score of about 760. With distressed homes a growing proportion of sales, it was not surprising that prices were down pretty sharply over the year. The supply of homes for sale rose for the second consecutive month. I consider that to be a sign that sellers have growing confidence in the market.

MARKETS AND FED POLICY IMPLICATIONS: Home sales are on the rise and the latest data from the Mortgage Bankers Association indicating the mortgage applications is rising is a further indication that the market is slowly improving. That is not to say it is strong or will be strong anytime soon. Still, the weakest link is beginning to put on a touch of muscle and if the trend continues, by year’s end conditions should look a lot better. Indeed, housing is not the biggest threat to the economy: it is oil. If oil prices continue to rise the expansion is not going to gain a whole lot of traction. The economy was changing gears when the price surge hit. Now we are looking at even softer growth during the first half of the year than I had and I was near or at the bottom of most forecasts. If much of the oil rise was uncertainty over supply (a polite phrase for speculation), then we should see a decent unwinding of the increase. That could come this summer and propel the economy forward during the second half of the year. I still expect that to happen. But for now, it is wait and worry about oil as the impact is rising as confidence is falling. That, of course, only reinforces the view that the Fed will complete QE2. As I noted a couple of months ago, the Fed will likely withdraw liquidity through a three stage process: First will be the completion of the quantitative easing with reinvestment of maturing assets and interest continuing. Then they would stop reinvesting. Finally, there would be actual rate hikes. That is a slow process that should start in June with the first rate hike coming at the end of the year.
RE/MAX Connection Realtors disclaimer:
RE/MAX Connection Realtors are not licensed financial advisors, and are not providing any financial advice, you should consult with a licensed financial advisor prior to making any financial decisions. RE/MAX Connection Realtors are only providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.
Our company accepts no liability for the content of this email/blog, or for the consequences of any actions taken on the basis of the information provided. Any views or opinions presented in this email/blog are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this email and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this email.
RE/MAX Connection Realtors, 1000 East Lincoln Drive, Suite 2, Marlton, NJ 08053 www.goconnectionnj.com

January Existing Home Sales

NAROFF ECONOMIC ADVISORS, Inc.
Joel L. Naroff
President and Chief Economist

INDICATOR: January Existing Home Sales
KEY DATA: Sales: up 2.7%; 1-Family: +2.4%; Condos: +4.7%; Median Prices: -3.7%

IN A NUTSHELL: “Distressed homes are being recycled and while that may be bad for prices it is good for the housing market.”

WHAT IT MEANS: The housing market is slowly coming back, powered by rising distressed homes demand. Existing home sales improved solidly in January to the highest level in eight months. In the spring, sales were boosted by incentives but now they are being driven by sales to investors. Regionally, only the Northeast posted a decline while the West led the way with a nearly 8% increase. The National Association of Realtors noted that all cash purchases and investor demand has been rising consistently and is beginning to make a dent in the inventory, which is falling sharply. But there is no such thing as a free home and with distressed properties accounting for such a large share of the demand, it is not surprising that prices continue to decline. In January, they were the lowest in almost nine years.

MARKETS AND FED POLICY IMPLICATIONS: This was a good report as sales are steadily rising and inventory is thinning. We have to be cautious about prices, though. Yes, they look abysmal but with so much of the market being driven by distress sales, it is not clear what has happened to the price of “normal” properties. I suspect in those cases, the price declines are limited and in those areas where foreclosures have been modest, they could even be rising. Don’t be surprised if housing adds to growth all this year, though with the pace of sales and construction so low, not a lot of jobs will accompany those gains. Meanwhile, back in the Middle East, turmoil continues and until we get some idea when it will end and what the implications are for oil and other commodities, investors are likely to remain on edge.

RE/MAX Connection Realtors disclaimer:
RE/MAX Connection Realtors are not licensed financial advisiors, and are not providing any financial advise, you should consult with a licensed financial advisior prior to making any financial decisions. RE/MAX Connection Realtors are only providing this economic statement from Naroff Economic Advisors, Inc. for informational purposes.
Our company accepts no liability for the content of this email/blog, or for the consequences of any actions taken on the basis of the information provided. Any views or opinions presented in this email/blog are solely those of the author and do not necessarily represent those of the company. Finally, the recipient should check this email and any attachments for the presence of viruses. The company accepts no liability for any damage caused by any virus transmitted by this email.
RE/MAX Connection Realtors, 1000 East Lincoln Drive, Suite 2, Marlton, NJ 08053 www.goconnectionnj.com

December Existing Home Sales

NAROFF ECONOMIC ADVISORS, Inc.

Joel L. Naroff

President and Chief Economist

INDICATOR: December Existing Home Sales

KEY DATA: Sales: +12.3%; 2010 Annual: -4.8%

 IN A NUTSHELL:   “With the confusion from the government’s buyers’ incentives finally a thing of the past, it appears that the housing market is getting better.”

 WHAT IT MEANS:  The weakest link may be finally eating some spinach.  Existing home sales soared in December wiping out the downturn that appeared after the first time/long time buyers’ incentives disappeared.  It looks like buyers are coming in to the market and that is occurring throughout the nation.  Every region posted double-digit gains.  The National Association of Realtors noted that distressed homes made up a significant portion of the sales with the percentage rising to 36% from 33% in November.   Prices eased back but largely because of a sharp drop in the West where foreclosures are the way to go.  There were increases in prices in the Midwest and South and a minimal decline in the Northeast.  For the year as a whole, median home prices rose a modest 0.3%.  Still, they were up.  The inventory of homes fell with the number of houses available down and the months of supply also off.  

 MARKETS AND FED POLICY IMPLICATIONS: This was a solid report that points to a firming in the housing market, at least for existing homes.  Clearly, distressed properties are a critical part of the recovery as those homes generally sell at a significant discount.  That makes it difficult for new home builders to compete and that part of the market will likely continue to lag.  Investors are becoming a very significant part of the market as they bought about 20% of the properties in December, according to the National Association of Realtors.  That is a good thing as the inventory has to be reduced.  Investors are not simply flipping the homes but are often renting them out, matching need with supply.  This is a valuable part of the process of working through the excess number of homes built last decade.  The sooner that happens, the quicker the housing market will return to normal.  This report is another in a long line that point to the recovery improving and investors and members of the Fed should read it that way.