Unexpected Increase in Existing Homes Sales Key housing indicators gave off mixed signals on the health of the current housing market this past week. Existing home sales data in the beginning of the week hinted that the housing market may have turned the corner, squeezing out a small gain in February. It was the first time since July that existing home sales posted a monthly increase in annualized sales while reaching its fastest sales pace since October. While the gain was unexpected, it unfortunately is not enough on its own to be an indication of market stabilization. Meanwhile, the Commerce Department dampened the mood as they reported later in the week that new home sales fell for the fourth consecutive month in February. While new homes data is typically revised due to large sampling and statistical errors, the contradicting movement between new and existing home sales suggests the market remains unstable.
Negative news on the housing front along with continued concerns regarding the financial sector continued to weigh on equities this past week. Rumors of further bank defaults along with weaker economic data pushed stocks lower this week. Both the DJIA and the broader S&P 500 index shed a little over 1% during the past week. Consumer confidence continued to swoon from expectations of a weaker economy and a bleak outlook on employment. Crude prices also gained during the week as the commodity ended trade this week at $105.62/barrel.
The Economy Final estimates for fourth quarter gross domestic product remained unchanged from the advance and preliminary figure of 0.6%. Final growth estimates for the fourth quarter were substantially slower than final estimates for third quarter growth which came in at 4.9%. It was widely expected that growth would slow due to the weak housing market and credit crunch during the quarter. Improved export figures along with an upward revision in consumer spending offset weaker revisions to business and government spending.
Consumer confidence in March dropped for the third straight month to its lowest levels in five years. The last time the consumer confidence index was this low was March 2003. The consumer confidence index plunged to 64.5 in March from a revised 76.4 in February which represents a 11.9 point drop from the previous month. This was the second straight month in which the consumer confidence index has posted a significant decline.
In February, personal incomes in the United States reached $11,990.2 billion, an increase of 0.5% from an upwardly revised $11,934.2 billion in January. On an annual basis, personal incomes increased 4.6% from February 2007. Personal incomes have increased every month since April. Personal incomes in February exhibited the slowest annual growth since December 2005.
Housing Market New and existing home sales moved opposite directions in February. New home sales fell 1.8% in February to a seasonally-adjusted 590,000 homes, down from a revised January figure of 601,000. This is the fourth straight month that new home sales have posted declines although sales for the previous three months were revised higher by 20,000 units. At the current sales pace, there are 9.8 months of new homes supply on the market. The number of new homes for sale continued to decline as builders have been scaling back production until the market stabilizes. New home inventory declined to 467,000 which is the lowest it has been since July 2005. The median price for a new home jumped 8.2% in February to $244,100 which is the highest it has been since November. An increase in both mortgage rates and new home prices in February pushed affordability back down to its lowest levels since November.
Annualized sales of total existing homes increased 2.9% in February to 5.03 million units. February's annualized pace is the fastest since October. Sales of existing homes are down 23.8% from the 6.60 million units in February 2007. Median existing home prices in February declined again to $195,900. Existing home prices are at their lowest levels since May 2004. Inventory of existing homes fell 3.0% from the previous month to 4.034 million units. At the current sales pace, there are 9.6 months of existing homes supply on the market. Due to falling prices, affordability for existing homes are at their highest levels since February 2003.
National average mortgage rates fell slightly to 5.85% in the latest Primary Mortgage Market Survey released weekly by Freddie Mac on March 27th. This is the second straight week that rates have declined and they are now back to their lowest levels since mid-February. In the week ending March 21st, the MBA's seasonally-adjusted Purchase Index jumped to 403.7 from 365.0 in the previous week. The latest figure reflects a 10.6 percent increase from last week but a 1.8 percent decline from the same period last year. Overall mortgage activity increased significantly this past week due to a surge in refinance activity.
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|Real GDP Growth||0.6%||D-|
|Purchase Mortgage Applications||403.7||C|
|Median Price Existing Home||$195,900||F|
|Existing Home Sales||5,030,000||D+|
|Existing Home Inventory||4,034,000||F|
|Existing Home Affordability||56.2%||B+|
|Median Price New Home||$244,100||F|
|New Home Sales||590,000||F|
|New Home Inventory||467,000||F|
|New Home Affordability Ratio||46.7%||B|