Price of Oil Sinks, as Does Another Home Builder Dismal housing market conditions in the once booming Florida market have forced multi-family residential developer WCI Communities to file for Chapter 11 bankruptcy while also forcing the failure of small local lender First Priority Bank. This was the eighth bank failure in the U.S. this year. Both new and existing home sales continued to decline in June which validate that conditions remain weak in most housing markets across the nation. Although the credit crunch and continued declines in the housing markets have forced another public builder and more regional banks to go under, falling oil prices in the past week took center stage and spurred enthusiasm in the equity markets.
Stocks rallied on Tuesday as declining oil prices and a decision by the Fed to keep rates unchanged at 2% sparked buying on Wall St. News that the most recent storm would not significantly disrupt any production facilities in the Gulf of Mexico sent crude prices for September delivery down to a little more than $119/barrel which is the lowest it has been since early May. Economic data in the past week, however, continued to show weakening conditions in the economy. Continued job losses, rising unemployment, and revisions to GDP actually showing that the economy contracted in the fourth quarter of last year added to concerns that tougher times may still be ahead.
The Economy Non-farm employment fell for the seventh straight month in July as the economy shed 51,000 payrolls. The economy has shed 463,000 so far this year. Currently, non-seasonally adjusted total non-farm employment shows a figure of 137,236,000, a loss of 0.13% from July 2007. The unemployment rate in July also jumped to a four-year high at 5.7%.
Advance estimates for second quarter gross domestic product jumped higher to 1.9% from the revised final first quarter figure of 0.9%. Although advance estimates show a surprisingly high growth rate for the second quarter due to the effects of the government's economic stimulus package and stronger exports coupled with slowing imports, revisions show that the economy experienced a quarter of contraction at the end of last year. Fourth quarter 2007 GDP figures were revised lower to reflect 0.2% contraction in the economy instead of the 0.6% growth that was previously reported. Growth in the first quarter of 2008 was also revised slightly lower to 0.9% from 1.0%.
Consumer confidence recorded its first monthly increase in seven months in July. The consumer confidence index increased slightly this month from its lowest levels since February 1992. The index increased to 51.9 in July from an upwardly revised 51.0 in June which represents a 0.9 point gain from the previous month.
Housing Market New and existing home sales both declined in June. New home sales in June declined for the second straight month after posting its first monthly increase since October 2007 in April. Sales eased 0.6% in June to a seasonally-adjusted 530,000 homes, down from a revised May figure of 533,000. Sales for the previous three months, however, were revised higher by 50,000 units. The number of new homes for sale continued to decline as builders continue to scale back production. New home inventory declined to 425,000 which is the lowest it has been since November 2004. In June, median new home prices rebounded from their lowest levels since December to $230,900.
Annualized sales of total existing homes in June declined after posting its first monthly increase since February last month. Sales declined 2.6% from May levels to 4,860,000 units. Sales of existing homes are down 15.5% from the 5.75 million units in June 2007. Median existing home prices in June increased for the fourth straight month to $215,100 from a revised $207,900 in May. This is the highest median existing home prices have been since August 2007. The number of existing homes for sale increased a slight 0.18% to 4.49 million units. At the current sales pace, there are 11.1 months of existing homes supply on the market. Existing home affordability declined for the fourth straight month due to increases in both mortgage rates and existing home prices in June.
National average mortgage rates declined to 6.52% in the latest Primary Mortgage Market Survey released weekly by Freddie Mac on July 31st. Rates had been at their highest levels since August 2007 in the previous week. In the week ending July 25th, the MBA's seasonally-adjusted Purchase Index declined to 309.5 from 335.6 in the previous week. This is the third straight week that the purchase index has declined and the lowest it has been since February 2003. The latest figure reflects a 7.78% decrease from last week and a 25.71% drop from the same period last year.
For market-level data and analysis please visit our website at www.hwmarketintelligence.com. For more detailed information on the indicators discussed in this key indicator alert, please visit the following links:
|Real GDP Growth||1.9%||D+|
|Purchase Mortgage Applications||309.5||F|
|Median Price Existing Home||$215,100||F|
|Existing Home Sales||4,860,000||D+|
|Existing Home Inventory||4,490,000||F|
|Existing Home Affordability||51.0%||C+|
|Median Price New Home||$230,900||F|
|New Home Sales||530,000||F|
|New Home Inventory||425,000||F|
|New Home Affordability Ratio||47.8%||B|