Forecast Update: Case-Shiller Index, Mortgage Purchase Applications, Jobless Claims, Consumer Confidence

A weekly analysis of the economic data released during the past week, and how current economic conditions are affecting the real estate market.

• Dallas Manufacturing Outlook

An indicator of economic activity, the Dallas Fed Manufacturing Outlook Survey moved up six points to 13 in November. An index value of zero points to national economic growth along historical trend rates; a negative value indicates growth rates that are below-average, while a positive value denotes above-average growth. Based on the survey data, all manufacturing indicators gained, including orders, shipments and capacity utilization. General business conditions, labor market and prices also showed positive advances.

• Commercial Real Estate Outlook

NAR released the November Commercial Real Estate Outlook, pointing to a flattening trend in the market declines and modestly improving fundamentals in 2011.

• Consumer Confidence

On a rise in consumer expectations for the future, Consumer Confidence improved to 54.1 in November from 49.9 in October. Recent NAR research showed that a post-election bounce in consumer confidence is typical.

• Case-Shiller Index

Case-Shiller house price data was also out earlier today. The Case Shiller index showed a slight decline in home prices in the month of September. Measured on a year over year basis, prices were up less than 1 percent for the year. NAR data for the same period released a month ago actually showed a slight decline for the year. More recent NAR data for October, released last week, show an even smaller decline than September data. Of course, these measures are national, and local price trends vary. See our recently updated Local Market Reports to see how the trend in your metro market compares with the national trend.

• Mortgage Purchase Applications

Mortgage purchase applications were up 1.1 percent for the week ending November 26th an encouraging sign after last week’s strong increase. This is highest level post-tax credit, but seasonal factors around the Thanksgiving holiday may still be impacting the data. Purchase applications do not take into consideration cash buyers who according to the September REALTORS® Confidence Index make up as much as 29 percent of transactions.

Mortgage purchase applications were down 10.8 percent from the same week a year ago.Refinances, which made up 74.9 percent of mortgage activity, fell 21.6 percent as mortgage rates continued to move up at 4.56 percent on a 30-year fixed mortgage.

• ADP Employment Survey

A private survey from ADP showed private sector employment increasing 93,000 in November. This is a positive sign for the employment sector. Look for the official data on Friday from the Department of Labor. Third quarter productivity rose 2.3 percent. Unit labor costs (the amount of labor producing each unit of output) fell 0.1 percent. This data shows that the employers are continuing to try and get as much out of each worker rather than hire additional workers. These are considered good indicators of future inflation; however, today’s report is no cause for concern.

• Construction Spending

Construction spending continued to increase in October (0.7 percent), following an increase in September. The rise was due to a 2.5 percent increase in residential outlays mainly due to multifamily housing.

• Jobless Claims

The improvement in the job marked stalled slightly last week with initial seasonally-adjusted jobless claims rising by 26,000 to 436,000, however 4-week moving average declined by 5,750 indicating continued long-term decline in the number of layoffs. The four-week average at 431,000 hasn’t been that low since Aug. 2, 2008. Data unadjusted for seasonal effects, in fact show a drop of over 54,000 initial claims. Four-week averages for initial claims point to employment gains in tomorrow’s employment report.

The largest increases in initial claims were in California, followed by Pennsylvania, Kentucky, Illinois, and Texas, while the largest decreases were in Indiana, Puerto Rico, Hawaii, the Virgin Islands, and the District of Columbia.

• Bureau of Labor Statistics Employment Report

The Bureau of Labor Statistics’ employment report carried disappointing news—the unemployment rate rose from 9.6 percent to 9.8 percent in November. Payroll employment edged up during November by only 39,000 jobs. For sustained growth, the economy needs to add more than 100,000 jobs per month. The gains were registered in temporary help services, mining and health care. Meanwhile, retail trade jobs declined. The hourly earnings on private nonfarm payrolls rose by 1 cent, to a rate of $22.75. Over the 12 month period ending in November, the hourly earnings gained 1.6 percent, maintaining a low level of inflationary pressure.