A weekly analysis of the economic data released during the past week, and how current economic conditions are affecting the real estate market.
Palm Coast, FL – April 15, 2011 – Every week the Research staff analyzes key data releases and explain what they mean for you and your business. In this update, we give the highlights of the most important data releases for the week of April 11-April 15, 2011, along with graphs that show the latest movement and overall trends.
At a glance, this table shows the forecast for some of the most pertinent weekly data for REALTORS® to keep in mind. This changes from week to week as new data becomes available. The directional shift notes the trend from last week’s numbers. For the full forecast from the latest Pending Home Sales release, click here (PDF).
Highlights for Monday, April 11, 2011
The average annual inflation expectation in the U.S. over the next ten years increased by 17 bps to 2.64% from one week ago.
The increase in mortgage rates has remained somewhat muted. The 30 year fixed mortgage rate closed Friday at 5.01% from 4.95% a week earlier.
Stronger inflation will put upward pressure on long term interest rates. NAR is forecasting interest rates to increase to 5.6% by the end of 2011.
Highlights for Tuesday, April 12, 2011
- The trade deficit figure for February released by the Bureau of Economic Analysis this morning showed a decline of $1.2 billion from an upwardly revised January figure. The decline resulted from a drop in imports, which outpaced a slowdown in exports. Of greater importance was the decline in imports of capital goods excluding autos, particularly inputs into electronics, and automobiles.
- While the decline in the trade balance is good on its face, it likely reflects the ramifications of Japan’s tsunami and nuclear disasters. Concern over the decline in Japanese production of inputs for U.S. finished goods was reflected in muted business confidence last month, but it appears to have shown up in this lagged estimate of imports of goods. This pattern could harm U.S. businesses and retard employment growth in the near term.
- Import/export prices were also released today by the Bureau of Labor Statistics. The index for import prices jumped 2.7% in March relative last month led by a sharp 9.0% increase in fuel prices. Core prices rose 0.6%, slightly higher than February’s 0.5% gain.
- Rising fuel prices are hurting consumers and increasing costs for REALTOR®. The impact of this trend will weigh on consumer and business confidence. Of equal importance is the decline in international transactions. If exports of U.S. capital goods depend on a dwindling flow of input imported from Japan, this could stymie U.S. production and result in slower job creation or even job cuts.
Highlights for Wednesday, April 13, 2011
Mortgage applications fell 6.7 percent for the week ending April 8, following the fourth consecutive week of interest rate increases.
Purchase applications were down 4.7 percent from the prior week and 11.4 percent lower compared with a year ago. Meanwhile, the Refinance Index declined 7.7 percent as mortgage rates on a 30-year fixed mortgage rose to 4.98 percent.
The weekly data does not account for the rising number of cash buyers. According to the March REALTORS® Confidence Index, cash buyers accounted for 35 percent of transactions.
The Census Bureau’s monthly advance report of retail sales registered a 0.4 percent increase for March. Retail sales also gained on a yearly basis, rising 7.1 percent from March 2010.
Highlights for Thursday, April 14, 2011
The new jobless claims showed some volatility last week, with new claims jumping 27,000 to 412,000. The weekly readings were below the critical job creation level of 400,000 since early March.
The continuing claims for the April 2 week fell 58,000 to 3.680 million. There had been 1.3 million net new job additions in the past 12 months to March. Assuming that jobless claims continue to trend down, NAR expects about 1.5 to 2 million net new jobs in the next 12 months.
The overall Producer Price Index continues to indicate inflation pressures largely from high oil prices, and increase 0.7 percent in March. This is following a 1.6 increase in February.
Friday, April 15, 2011
- Inflation is picking up. Consumer prices rose 0.5 percent for the second month in a row in March and are up 2.7 percent over the year ending in March. The biggest drivers of the increases in headline prices are food and energy costs.
- Core prices rose within a range that is not considered inflationary, 0.1 percent in March and 1.2 percent in the year ending in March. Shelter, which is the largest component of CPI accounting for 32 percent of typical consumer spending, rose 0.9 percent in the year ending in March.
- Core CPI excludes food and energy costs which tend to be more volatile and can indicate pressures other than inflation (such as supply shocks). However, consumers will notice increases in the prices of food and energy in their bottom line no matter the source. The typical US consumer spends 23 percent of their income on food and energy.
- A preliminary reading of consumer sentiment in April showed an uptick after a rather large decline in March. The subindexes for current conditions and expectations both showed improvement but elevated prices were noted and likely weighed down the increase. A final measure of consumer sentiment will be released at the end of the month.
Source: National Association of Realtors – Reprinted with permission