Housing data has remained gloomy in the first two months of the year. Both the new and existing home markets exhibited further weakness in January while prices continued to decline. An increase in foreclosure activity also added to the bleak picture as foreclosure tracking firm, RealtyTrac, said that foreclosures in the U.S. increased 8% in January compared to the previous month while rocketing 57% higher than January 2007 levels. If there is to be stabilization in sales activity this year it will likely be evident in March, which generally is when home sales activity begins to pick up for the spring selling season.

The stock market was not resilient enough to shrug off higher crude prices and continued declines in the housing market. While posting steady gains in the face of negative news early in the week, stocks tumbled on the last trading day of the month as the DJIA posted a 2.9% loss for the month of February. Weak data on consumer spending along with data earlier in the week showing increasing producer prices and slower economic growth finally caught up with equities. Oil also reached a new high this past week as crude traded as high as over $102/barrel before closing trade at slightly lower levels. The Fed will await employment data next week to get a better gauge on what actions need to be taken at their following meeting next month to spur economic growth while staving off inflation.

The Economy Preliminary estimates for fourth quarter gross domestic product remained unchanged from the advance figure of 0.6%. Preliminary growth estimates for the fourth quarter are 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. After experiencing the fastest annual growth pace since the third quarter of 2003 in the previous quarter, growth has now shrunk to its slowest pace since the first quarter of 2007. Improved trade figures helped preliminary revisions although most of the major components were revised lower. Continued troubles in the financial sector along with the sluggish housing market is expected to keep growth slow going into the first half of 2008.

Consumer confidence in February dropped for the second straight month to its lowest levels in toughly five years. The consumer confidence index plunged to 75.0 in February from a revised 87.3 in January which represents a 12.3 point drop from the previous month. On a percentage basis, February's monthly drop was the largest since September 2005.

In January, personal incomes in the United States reached $11,932.9 billion, an increase of 0.3% from a downwardly revised $11,900.7 billion in December. On an annual basis, personal incomes increased 4.9% from January 2007. Personal incomes have increased every month since April. Personal income growth in December exhibits the slowest annual growth since December 2005.

Housing Market Both the new and existing homes market showed further weakness in January. New home sales fell 2.8% in January to a seasonally-adjusted 588,000 homes, down from a revised December figure of 605,000. New home sales are now at their slowest annual pace since February 1995. At the current sales pace, there are 9.9 months of new homes supply on the market which is an all-time high. Inventory levels continued to decline as builders have been scaling back production until the market stabilizes. The number of new homes for sale declined to 483,000 which is the lowest it has been since August 2005. The median price for a new home is now at $216,000 which is the lowest median prices have been since September 2004. Lower prices and mortgage rates still did not provide any relief for new home sales in January.

Annualized sales of total existing homes fell 0.4% in January to 4.89 million units. January's annualized pace is the slowest since August 1998. Sales of existing homes are down 23.4 % from the 6.38 million units in January 2007. Median existing home prices in January declined again to $201,100. Existing home prices are at their lowest levels since February 2005. Inventory of existing homes rebounded back to their highest levels since November at 4.191 million units which is a 5.5% increase from the previous month. At the current sales pace, there are 10.3 months of existing homes supply on the market.

National average mortgage rates jumped again to 6.24% in the latest Primary Mortgage Market Survey released weekly by Freddie Mac on February 28th. Rates are now back to its highest levels since November. In the week ending February 22nd, the MBA's seasonally-adjusted Purchase Index increased slightly to 358.2 from 357.6 in the previous week. The latest figure reflects 0.17 percent increase from last week but a 10.74 percent decline from the same period last year. The drop in overall mortgage activity is due to significant declines in refinance activity in the face of rising mortgage rates.

For market-level data and analysis please visit our website at http://www.hwmarketintelligence.com. For more detailed information on the indicators discussed in this key indicator alert, please visit the links below.


Chicago Most Counties See Price Drops

The fourth quarter of 2007 saw the median price for a new detached single-family home rise to $339,900, a 5.9% increase from the same period last year. DuPage County posted the highest median price at $608,900, a 1% increase over the fourth quarter 2006; however, this increase is most likely the result of the great decline in detached sales in DuPage County this quarter, and we should not expect the median price to remain so high over the next several quarters. Cook County was next with a median price of $391,125, a decrease of 18.4% from the fourth quarter last year. DeKalb County, with the least expensive homes to choose from with a median price of $214,990, saw a decrease in median prices over the fourth quarter 2006, down 6.6%. (For more information check out our Chicago New Home Executive Summary)

Las Vegas High End Units Push Prices

The median sales price of $234,535 for attached homes in the fourth quarter 2007 remained consistent with the previous year’s fourth quarter, recording a variance of less that 1%. The North East submarket had the greatest increase in median sales price with $835,492, up 51% from the previous year. This significant increase was due to the high-end projects by Perini Building Company in City Center, such as the Vdara Condo Hotel, Veer Towers, and Residences at Mandarin Oriental. These condos have sold units that are individually priced in ranges from $700,000 to $8 million. (For more information check out our Las Vegas New Home Executive Summary)

Seattle, WA Highest Activity in Middle of Market

Only 16% of Seattle’s new detached sales were for homes priced less than $300,000. Almost all of these sales occurred in Pierce and Thurston Counties, which dominate the lower price ranges. No new detached homes can be found for less than $200,000. In King County, all of the detached sales were priced above $300,000 while the county captured 35% of all regional sales in this price range. Most sales in the fourth quarter fell in the $300,000 to $399,000 price range capturing 41% of overall detached sales. Only 7% of the regions new construction homes sold for over $700,000. (For more information check out our Seattle New Home Executive Summary)

Philadelphia Open Projects Increase while Sales Slow

There were 359 actively selling detached projects during the fourth quarter of 2007, seventeen more than the fourth quarter of 2006. Pennsylvania’s sector of the market had 216 active detached projects, while Southern Jersey had 143. In Pennsylvania, Chester County accounted for the most building activity with 98 detached projects, and Montgomery County followed with 66. In Southern New Jersey, Gloucester County continued to have the most active detached projects with 61, followed by Atlantic County with 37. (For more information check out our Philadelphia New Home Executive Summary