Economic Indicators: Weekly Update – April 29

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 29, 2011 – Every week the National Association of Realtors® 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 25-April 29, 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 25, 2011:

• The rate on a thirty year fixed rate mortgage declined to 4.86% last week from 4.95%.
• The average annual inflation expectation in the U.S. over the next ten years remained relatively unchanged at 2.59%.
• Stronger inflation will put upward pressure on long term interest rates to increase. NAR is forecasting interest rates to increase to 5.6% by the end of 2011.

Highlights for Tuesday, April 26, 2011:

• S&P Case Shiller House Price Index (HPI) data released today show some mixed signs of recovery for the housing market. While the year-over-year index shows 2.6 percent and 3.3 percent decline for 10-City Composite and 20-City Composite respectively, the month-over-month decrease is easing down.
• Separately, the Consumer Confidence Index came at 65.4 and shows 1.6 points improvement from last month.  Consumers’ evaluation of the employment  situation improved substantially, a 2.6 point drop in those saying jobs are currently hard to get to 41.8. This is the lowest reading in more than two years.

Highlights for Wednesday, April 27, 2011:

• Mortgage applications declined 5.6 percent for the week ending April 22.
• Purchase applications accounted for most of the decline, contracting 13.6 percent from the prior week.  They were 28.8 percent lower compared with a year ago. Meanwhile, the Refinance Index declined 0.6 percent. Mortgage rates on a 30-year fixed mortgage declined from 4.83 percent to 4.80 percent during the week.
• The weekly data seems to corroborate the REALTORS® Confidence Index, which indicates that slightly more than a third of purchases are done with cash.

Highlights for Thursday, April 28, 2011:

• Jobless claims for the week ending April 23^rd revealed a 25,000 increase to 429,000.  The 4-week average of 408,500 was 15,000 higher than a month earlier.  Claims are above the critical 400,000 mark, the level at which more jobs are being created than cut, placing upward pressure on the unemployment rate.
• GDP growth fell sharply in the 1^st quarter of 2011 after a strong finish to 2010.  The decline in construction and exports will likely impact employment, which is already reflected in the upward trend in unemployment insurance claims.  Rising fuel and food prices as well as concerns about supply-chains that run from the tsunami and nuclear impacted areas of Japan to the United States likely took a toll on both consumer and business spending in the 1^st quarter.
• However, demand for housing has been on the rise as investors snap up bargain priced properties.  Investor purchases are important during this economic soft patch as they will help to reduce the supply of housing, which will move the market to move a price floor.

Friday, April 29, 2011:

• Personal income increased in March by 0.5 percent while disposable personal income (income after taxes) and personal consumption expenditures each increased 0.6 percent.  The PCE price index, a measure of the price level of typical personal consumption expenditures, increased 0.4 percent, in line with the larger increases seen in other inflation measures recently.  For more see NAR’s Inflation Watch.
• Because consumption increased in line with the increase in income, the personal savings rate was unchanged at 5.5 percent.
• In the accompanying chart, you can see the history of the personal savings rate which averaged about 3 percent in the early part of the last decade and declined to less than 2 percent from 2005 to early 2008, before rebounding sharply to more than 5 percent, where it remains today.
• While some are increasing savings for retirement or trying to rebuild a personal emergency fund, some are likely saving for a down payment.  Our 2010 Profile of Home Buyers and Sellers shows that 66 percent of home buyers, including 57 percent of repeat buyers and 74 percent of first-time buyers, rely on savings as a source of a down payment.
• Consumer sentiment improved in April mostly due to an improvement in the outlook for the future, similar to the move in consumer confidence earlier in the week.  An improved outlook may mean that consumers will be more willing to use savings for asset purchases, such as that of a home, in the near future.

Source: National Association of Realtors®