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 – August 26, 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 August 22-August 26, 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. For the full forecast from the latest Pending Home Sales release, click here (PDF).
Highlights for Monday, August 22, 2011
- There could soon be another round of quantitative easing to help prop up the economy and stop the bleeding of the stock markets. The Federal Reserve would in essence be printing money to buy government borrowing needs.
- This would mark a third round of quantitative easing. It is an unprecedented policy in the U.S. first done in response to the financial crisis of 2008 which tipped the economy into a deep recession. So far about 1.2 trillion in fresh greenbacks have been printed to buy government and mortgage debt. If there is another round, then the amount will likely be in the 300 to 500 billion.
- In theory, this action should provide liquidity to at least help the stock market. The boost in stock market wealth then will supposedly lead to an increase in consumer spending and business investments.
- The side effect, however, is an increased risk of inflation. The end result could be equivalent to pulling on a string with no genuine help for the economy. Gold prices and other commodity prices, including farm produce and farm land prices, are expected to go higher as people seek inflation protection.
Highlights for Tuesday, August 23, 2011:
- New homes sales followed the trend set by existing home sales last week, easing 0.7% from June, but jumping 6.8% relative to last year. The prior two month’s sales figures were revised lower, but the months supply of new homes held steady at 6.6 months and is much better than last July’s 9.0 months.
- The median home price for new homes fell a sharp 6.8% from a month earlier, but is up 4.7% from July of last year. This year’s strength in prices likely reflects a tighter stock and larger homes selling than last year when the $8,000 Federal tax credit drew in many first-time buyers.
- Foreclosures started rose for the 2nd consecutive quarter as banks continued to catch up after the fall’s moratorium, while the foreclosure inventory and 90-day delinquency rates eased. However, the 30-day delinquency rate is up for the 2nd consecutive quarter, suggesting that the soft economy and labor markets had an impact on some owners and that the 90-day delinquency rate and foreclosure rate are likely to rise in the future. About 30 percent of all home sales will be distressed over the next 2 years. This is a necessary clearing processes from the residual impact of past lending mistakes.
Highlights for Wednesday, August 24, 2011
- Mortgage applications declined 2.9 percent during the week ending August 19, with purchases decreasing 7.3 percent and refinancings contracting 1.7 percent.
- Interest rates on 30-year fixed mortgages rose from 4.32 to 4.39 percent.
- Cash purchases—not covered by this mortgage survey data—have been trending at roughly 30 percent of all home sales transactions. So even though a fall in mortgage purchase applications often signals lower home sales activity, there are times when sales actually pick up when cash purchases also rise. For example, cash purchases are reported to have risen to about 60 percent of all transactions in Miami and Las Vegas.
Highlights for Thursday, August 25, 2011:
- Labor strikes by the Communications Workers of America and Verizon Communications were cited as a special factor in the recent increase in initial jobless claims which were up 5,000 to a total of 417,000. At least 12,500 initial claims were filed in the week ending 8/13/2011 and at least 8,500 initial claims were filed in the week ending 8/20/2011 due to the strike.
- The four-week average increased as well, up 4,000 to a 407,500 level, ending a period of continuous decreases. The 4-week average is 7,000 lower than the last month. The 400,000 level is generally considered by economists as the point at which the economy is creating more jobs than losing.
Friday, August 26, 2011:
- GDP growth in the second quarter was revised down today from 1.3 percent to 1.0 percent. There was no change to the first quarter estimate which was adjusted in last month’s release to 0.4 percent.
- GDP estimates are typically revised twice after the initial release to take advantage of more complete data. Typically, the changes are small—0.1 or 0.2 percent on average, but more sizeable revisions, like we’ve seen recently, underscore the difficulties in economic data collection and measurement.
- August was an uncertain month for consumers, and this is reflected in the University of Michigan Consumer Sentiment data for August. Both consumer expectations and assessment of the current condition declined substantially leading to a reading of the overall index that is barely above the November 2008 low. The expectations subindex declined to a new low, and the current conditions subindex was slightly below its 2009 average level.
- Today’s Consumer Sentiment estimate was an update from preliminary data released August 12, a time period that was much closer to US debt ceiling and market uncertainty. Today’s reading showed a slight improvement, from 54.9 to 55.7 in the overall index, demonstrating that as conditions improve, consumers are aware.
- Finally today, Chairman Bernanke addresses the annual meeting of Monetary Policy Economists hosted by the Federal Reserve in Jackson Hole. While Bernanke called the recent performance of the economy “much less robust than we had hoped,” he stressed that his long-run view was “optimistic” as a result of strong fundamentals of population growth, productivity and innovation.
- He cited housing difficulties as a reason for the lack of robustness in the current recovery, reminding the group of the housing market’s usual role as a driver of post-World War II recoveries.
- Some expected Bernanke to introduce a new monetary stimulus, and while he acknowledged that the Federal Open Market Committee (FOMC) had discussed other tools at its disposal, he did not introduce a new plan of action, instead reiterating and clarifying the FOMC’s commitment of low short-term rates through 2013. This should help keep mortgage rates low for some time, too, though factors such as inflation, will likely put pressure on them to rise.
Source: National Association of Realtors®