Economic Indicators: Weekly Update for June 25, 2011

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 – June 25, 2010 – 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 June 20-June 24, 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, June 20, 2011

• 10-year Treasury yields are at exceptionally low rates, at 2.95 percent this morning.   Regarding the $14 trillion national debt, low rates will help on interest costs.
• Debt ceiling debates, bickering, and discussion will take place over the summer.  Washington policy wonks will probably announce something like cuts to the tune of $1 trillion in spending as part of the compromise.  However, if interest rates were to rise, then all those big cuts would be completely eaten up by the need to pay higher interest payments.
• From the real estate point of view, the 10-year Treasury yield is monitored because the 30-year mortgage rates are priced from it.  The 30-year mortgage rate is the 10-year Treasury yield plus about 2 percentage points.  So if the government borrows at 3 percent then the mortgage rate will be around 5 percent.

Highlights for Tuesday, June 21, 2011

• Existing Home Sales were released on Tuesday.

Highlights for Wednesday, June 22, 2011

• Mortgage applications declined 5.9 percent for the week ending June 17.
• The Purchase index decreased 2.8 percent from the previous week, indicating continued weakness in the housing markets.
• Refinancing activity declined 7.2 percent from the prior week.  Mortgage rates on a 30-year fixed mortgage increased from 4.51 percent to 4.57 percent during the week.

• The FOMC found weak employment, higher food and energy prices and remaining fall-out from the Japanese nuclear disaster.

  

Highlights from Thursday, June 23, 2011

• The new jobless claims report for the week ending June 18^th show no signs  of stability. The report showed a 9,000 rise in jobless claims, after  a 6,000 upward adjustment from the week before. However, data for six states had to be estimated due to some technical difficulties, so next week’s revision may provide more encouraging news.
• The new claims stand at 429,000, with a 4-week average at 426,250.  That is still above the 400,000 level needed for significant improvement in the employment market. The continuing claims didn’t change much.
• If jobless claims stays up like the past week and do not trend down, NAR expects less than 1.5  million net new jobs in the next 12 months, which would barely lower the unemployment rate.
• Sales of new homes fell 2.1 percent in May to a 319,000. This is better than experts were expecting. Months-supply now stands at 6.2 months or 166,000 new homes on the market, down from 6.3 in April and from 6.9 in March.

Friday, June 24, 2011

• The growth rate of the economy (GDP) in the first quarter was revised up to 1.9 percent from 1.8 percent as a result of more complete data.  While this is certainly good news, it does not materially change the description of growth—lackluster, especially considering the severity of the recession.  Trend growth is 2.5 to 3 percent per year, so anything below this is somewhat of a disappointment.  In the fourth quarter of 2010, GDP growth was 3.1 percent.
• The advanced report on manufacturing shows that durable goods orders increased 1.9 percent in May.  Durable goods orders have risen fairly consistently from their early 2009 low, and this growth has been a boost to recovery.
• Still, durable goods orders are at the same level as they were in 2005, $38.8 billion or 20 percent below their 2007 peak.  One could interpret this to mean that there is plenty of room for further growth in durable goods orders, particularly as long as interest rates remain low and are anticipated to rise as Lawrence Yun discussed in Monday’s update.

 Source: National Association of Realtors®