Forecast Update: Existing-Home Sales, Case-Shiller Index, New Home Sales, and more

Weekly analysis of the economic data released during the past week, and how current economic conditions are affecting the real estate market.

Existing-Home Sales

Existing Home Sales data for September was released, and showed a strong gain. Read more >

The S&P/Case-Shiller Home Price Index

The S&P/Case-Shiller Home Price Index showed a decline in both the 10-city and 20-city composite indexes from July to August, but both indexes remain higher than their levels from the same time last year. The 10-city index was up 2.6 percent over the 12 months ending in August of 2010, while the 20-city index was up 1.7 percent over the same period. Twelve of the cities in the 20-city index posted a decline in prices over the 12-month period ending in August. Most of the cities that remain positive were among the first cities to enter the housing slump, including Los Angeles, Boston, San Diego, and San Francisco. Washington, DC is also up compared to a year earlier at 4.8 percent.

Mortgage Purchase Applications

Mortgage purchase applications were up 3.9 percent for the week ending October 22. Purchase applications do not take into consideration cash buyers who according to the August REALTORS® Confidence Index make up as much as 28 percent of transactions. Mortgage purchase applications were down 30.8 percent from the same week a year ago.

The government portion of the index (FHA loans) was up 4.4 percent. New FHA regulations went into place at the beginning of the month. Refinances, which made up 82.3 percent of mortgage activity, were up 3.0 percent as mortgage rates fell to 4.25 percent on a 30-year fixed mortgage.

New Home Sales

New Home Sales were up 6.6 percent in September to an annual pace of 307,000, yet still remain very weak historically. The median price increased slightly to $223,800. Months’ supply of new homes fell to 8.0. Sales in the Midwest rose over 60 percent, while sales in the West fell almost 10 percent.

Durable Goods

New orders for durable goods increased 3.3 percent in September; however, the report was weak excluding the boost in the demand for commercial aircrafts.

Jobless Claims

New jobless claims data for week ending October 23 show a significant improvement in the job market, above all expectations. There were 21,000 fewer claims bringing the total claims down to 434,000.The 4-week moving average also decreased by 5,500 to 453,250. Dropping below 400,000 would suggest more jobs are being created than terminated. As a result, the unemployment rate for workers with unemployment insurance decreased 0.1 percentage point from the prior week’s 3.6 percent. The number of continuing claims also dropped significantly, by 122,000 to 4,356,000. The 4-week moving average decreased by 38,500.

The largest decrease in new claims was in California, primarily in service industry, followed by North Carolina, New York, Pennsylvania, and Texas. Puerto Rico had the largest increase in new claims, followed by Minnesota, Wisconsin, Florida, and Alabama.

Gross Domestic Product (GDP)

Third quarter GDP expanded at a 2.0 percent annualized pace, following a 1.7 percent increase the in the second quarter. This marks the fifth consecutive quarter of real GDP growth. Gains were seen in inventory investment, consumer spending, equipment investment, and government purchases. The highest gain was in personal consumption expenditures (PCEs). PCEs were the strongest since late 2006. However, the economy remains soft as it is below the 3 percent historical average and much below the 4 to 5 percent that would be expected coming out of the recession. The unemployment rate will remained elevated near 10 percent for a while.

Consumer Sentiment

Consumer sentiment fell to 67.7. There will not be any meaningful increase until the economy improves vigorously. Usually after an election, consumer sentiment rises. The majority of people got their desired result. As a result, there could be an improvement in the next month’s data.