Housing Hits a Wall, Part II
- Existing Home Sales fell by 1.3 percent in July, to a 5,440,000 unit annual rate.
- Initial Claims for Unemployment Insurance gained 2,000 for the week ending August 19 to hit 234,000.
We reported yesterday that new home sales fell more than expected in July. Today we see that existing home sales also fell in July. According to the National Association of Realtors, sales of existing homes fell by 1.3 percent in July, to a 5,440,000 unit annual rate. This is clearly below the post-recession peak rate of 5,700,000 set last March. So, despite lower mortgage rates, a strong labor market and a surging stock market in July, home sales generally limped through mid-summer. Sales in the Northeast fell by 14.5 percent in July. The Midwest slipped by 5.3 percent. The South gained 2.2 percent and the West was up by 5.0 percent. The inventory of unsold existing homes on the market remained at a tight 4.2 months’ worth. The median sales price of an existing home was up by 6.2 percent in July over the previous 12 months.
Labor indicators still look good. Initial claims for unemployment insurance increased inconsequentially by 2,000 for the week ending August 19, to hit 234,000. Continuing claims were unchanged for the week ending August 12, staying at 1,954,000. We expect to see about 170,000 net new payroll jobs created in August. If there is a weather event on the Texas coast this weekend causing a refinery shutdown, that will not affect the payroll counts for August.
Federal Reserve Chairwoman Janet Yellen will speak tomorrow at the Fed’s annual Jackson Hole retreat. This is not a policy setting meeting so there will be no official policy announcement. Yellen’s speech and public comments will be scrutinized for any hints about what the Fed will do at the next official FOMC meeting over September 19-20. We expect the Fed to keep interest rates unchanged on September 20 and to announce that their balance sheet reduction program will begin in October. European Central Bank President Mario Draghi will also speak at Jackson Hole tomorrow. Draghi’s comments may contain hints about the ECB’s plan to taper their bond purchases. The Federal Reserve Bank of Kansas City hosts the Fed’s annual Jackson Hole meeting. So it is noteworthy that Kansas City Fed President Esther George said yesterday that she expects to see one more fed funds rate hike this year.
Market Reaction: U.S. equity markets are mixed. The 10-year Treasury bond yield is up to 2.18 percent. NYMEX crude oil is down to $47.78/barrel. Natural gas futures are up to $2.99/mmbtu.
For a PDF version of this Comerica Economic Alert click here: Existing_Home_Sales_082417.
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