Economic Indicators: Weekly Update for May 27, 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 – May 13, 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 May 23-May 27, 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, May 23, 2011

• The rate on a thirty year fixed rate mortgage remained relatively unchanged last week at 4.70%, but is down 25 bps from mid-April.
• The average annual inflation expectation in the U.S. over the next ten years declined by 9 bps to 2.30%
• The decline in inflation expectations and continued low long term interest rates may suggest expectations of slower economic growth. It may also suggest a preference for less risk assets.

Highlights for Tuesday, May 24, 2011

• New homes sales were down 23.1% in April relative to the same month last year according to the Census Bureau.  The decline was no surprise as the 2010 figures were fueled by the $8,000 Federal tax credit.   However, the median sales price was up 4.6% over this period, likely a reflection of tighter inventories, higher commodity prices, and more new sales occurring in non-distressed markets.
• Inventories are at historic lows, limiting the volume of homes that can be sold.
• As a share of total single family sales, new homes fell to just 6.8% in April.  Historically, that figure has hovered around 15% to 20%.  New home sales reflect weakness in the housing construction sector, which has hurt employment growth, but has enabled the housing market to focus on the overhang of inventory from short-sales and foreclosures.

Highlights for Wednesday, May 25, 2011:

• Mortgage applications rose 1.1 percent for the week ending May 20.
• The Purchase index advanced 1.5 from the previous week, and was 3.1 percent higher compared with a year ago.
• New orders for manufactured durable goods declined 3.6 percent in April, to $189.9 billion. The figure represents a second decline in the last three months.

Highlights for Thursday, May 26, 2011:

• The initial jobless claims are continuing to show signs of volatility with an increase of 10,000 last week. This week’s increase follows last week’s substantial decline.
• The total level is now at 424,000 which is above the critical 400,000 level needed for improvement in the job market. Even when looking at the states that had the largest increases, no evident pattern that emerges.
• Fewer layoffs came  largely from the service and automobile industries. If jobless claims stay up as they have in 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.

Friday, May 27, 2011:

• Personal income and disposable personal income each grew at a 0.4 percent rate in April and March.  On a year over year basis, both are on track to grow at over 4 percent this year and have registered year over year gains of 4 percent or more each month this year.  While this is not the robust post-recession growth one might hope for, it is a positive trend that correlates with earlier positive employment data.
• However, real disposable personal income, after adjusting for higher consumer prices, has been essentially unchanged the last two months because of increases in prices.  The year over year growth in this figure in April was about half of its 10-year average compared to being near or above average in the first three months of the year.
• Personal saving held steady at 4.9 percent.  This savings rate is below the 6 percent rate of a year ago and well below the 8.2 percent peak reached in the aftermath of the economic crisis.  This rate is within the 1990s range and above the 1 to 4 percent savings rate that predominated in the 2000s.
• Data from the Michigan Survey of Consumer Sentiment suggests that most consumers believe that high and rising prices are here to stay but that rapid price increases have passed.  The Index of Consumer Sentiment in April was higher than in March but below the April 2010 reading.  The current conditions index suggests that while there was no change in the month, conditions are better than one year ago.  The big movement is in the expectations index.  Expectations have improved over March but are much lower than one year ago as consumers seem to now anticipate a drawn out return to recovery and less economic security.
• 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).

Source: National Association of Realtors®