Thursday, November 20, 2014

First Year-Over-Year Rise in Existing Home Sales in a Year

Existing home sales rose 1.5% in October to a seasonally adjusted annual rate of 5.26 million. Sales are now above the year-over-year levels for the first time in a year, and have reached the highest annual pace since September 2013. Sales in September was upwardly revised to a seasonally adjusted annual rate 5.18 million.

The median existing-home price increased 5.5% year-over-year to $208,300 in October, marking the 32nd consecutive month of year-over-year price gains.

Total housing inventory fell 2.6% in October to 2.22 million homes available for sale, yet increased 5.2% from October 2013. There is currently a 5.1-month supply of total existing homes available for sale, the lowest since March.

NAR Chief Economist Lawrence Yun noted: “The growth in housing supply this year will likely prevent the drastic sales slowdown and coinciding spike in home prices we saw last winter due to low inventory. However, more housing starts are needed to increase supply, meet current demand and keep price growth in check.”

All-cash sales were 27% of transactions in October, a three-percentage point climb from September but four percentage points lower than October 2013.

First-time home buyers represent less than 30% of all buyers, the lowest level in nearly three decades. Earlier this month, Federal Housing Finance Agency Director Mel Watt offered details about several guidelines his agency intends to issue for loans with 3-5% down payments to be purchased by housing GSEs Fannie Mae and Freddie Mac. Speaking to a housing industry conference in New Orleans, Watt explained that the agency’s goal is to help address some of the headwinds to first-time homeownership. “We know that the size of a down payment — by itself — is not the most reliable indicator of whether a borrower will repay a loan,” he explained.

Regionally, existing home sales climbed 2.9% month-over-month in the Northeast, 5.1% in the Midwest and 2.8% in the South. However, sales in the West declined 5.0%.

Read the NAR report.

CPI Unchanged in October, Increased 1.7% Yearly

The Consumer Price Index was unchanged in October on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported. The index increased 1.7% in the past year, before seasonal adjustment.

The index for food prices increased 0.1% on a seasonally adjusted basis, the smallest increase since June. However, food prices increased 3.1% from October 2013, the largest unadjusted change since April 2012.

Energy prices declined 1.9% over the month, the fourth consecutive drop, led by a 3.0% fall in energy commodities (a 3.0% decline in gasoline and 4.0% in fuel oil). Energy services declined 0.2%, as a 2.7% reduction in utility gas service was partially offset by a 0.5% increase in electricity.

The index for all items less food and energy rose 0.2% in October after increasing 0.1% in September. The monthly increase was led by rising prices for new vehicles (0.2%), services less energy services (0.3%), shelter (0.2%), transportation services (0.8%) and medical care services (0.2%), partially offset by a decline of 0.9% in used cars and trucks and 0.2% in apparel.

On a yearly basis, the energy index has fallen 1.6%. The fuel oil index has declined 6.5% and the gasoline index has fallen 5.0%. However, the index for natural gas has increased 3.4% and the electricity index has advanced 3.1%.

Read the Bureau of Labor Statistics report.

Wednesday, November 19, 2014

Federal Funds Rate Likely to be Maintained for a “Considerable Time”

Some Federal Reserve board members opined that the language used in the statement, which indicates that the current target range for the federal funds rate would likely be maintained for a “considerable time” after the end of the asset purchase program, should be eliminated, the minutes of the Federal Open Market Committee meeting of October 28-29 revealed. Nonetheless, the phrase “considerable time” was used in the Committee’s press conference in October, as other Committee members thought the phrase was useful in communicating the Committee’s policy intentions. Committee members noted that the removal of this language might be seen as signaling a significant shift in the stance of policy, potentially resulting in an unintended tightening of financial conditions. The Committee agreed to maintain the target range for the federal funds rate at 0% to 0.25%.

In October, the FOMC concluded its open-ended bond buying program associated with QE3, completing the tapering of purchases that it began last December. All members but one supported the conclusion of the asset purchase program and maintaining and exiting policy of reinvesting principle payments from its holdings of agency debt and agency MBS.

With regard to the state of the economy, most of the FOMC meeting participants agreed that economic activity continued to expand at a moderate pace. Labor market conditions improved somewhat further, with solid job gains and a lower unemployment rate. Inflation, which participants expect may be held down in the near term by lower energy prices and other factors, is expected to move toward the Committee’s 2% goal in coming years. However, some Committee members expressed concern that inflation might persist below the Committee’s objective for quite some time.

Notably, FOMC staff revised down projections for real GDP growth a little over the medium term in response to a further rise in the foreign exchange value of the dollar, deterioration in global growth prospects and a decline in equity prices. But even with this forecast of slower expansion, real GDP is still expected to rise faster than potential output in 2015 and 2016.

Read the FOMC minutes.

Fed Announces Appointment of the Chairs and Deputy Chairs for 2015

The Federal Reserve Board has announced the designation of the chairs and deputy chairs of the 12 Federal Reserve Banks for 2015. Each Reserve Bank has a nine-member board of directors. The Board of Governors in Washington appoints three of these directors and each year designates one of its appointees as chair and a second as deputy chair.

View the 2015 chairs and deputy chairs.

Housing Starts Dip in October, Still Above 1 Million Pace

Housing starts in October dipped to a seasonally adjusted annual rate of 1.009 million, 2.8% below the revised September estimate of 1.038 million, but 7.8% above the October 2013 rate of 936,000. Single-family housing starts grew at a rate of 696,000, 4.2% above the revised September figure of 668,000. The rate of growth for multifamily units was 300,000, 15.5% below the revised September estimate of 355,000.

The slowing rate of housing starts was broad based. Housing starts in the Midwest declined 18.5% to 145,000 total units, the largest of the four regions, followed by a 16.4% decline to 97,000 units in the Northeast and a 10.9% decline to 221,000 units in the West. The South, the only region to experience an acceleration in housing starts, increased 10.1% to 546,000 units.

Building permits were at a seasonally adjusted annual rate of 1.080 units, which is 4.8% above the revised September rate of 1.031 and 1.2% above the year-ago estimate of 1.067. Building permits for single-family units were at a rate of 640,000, 1.4% above the September figure of 631,000. Building permits for multifamily units were 300,000.

Housing completions in October were at a seasonally adjusted annual rate of 881,000, 8.8% below the revised Septmeber estimate of 966,000, but 8.1% above the year-ago rate of 815,000. Single-family housing completions were at a rate of 585,000, 7.4% below the revised September rate of 632,000. The October rate for multifamily units was 289,000.

Read the Census release.

Tuesday, November 18, 2014

Federal Reserve Released Survey of Young Workers

The Federal Reserve published a new report based on its 2013 Survey of Young Workers. The survey found that 45% of respondents are optimistic about future employment opportunities compared to 21% who are pessimistic and 34% who are not sure. Respondents with higher levels of education, work experience and job opportunities were more likely to be optimistic about their job future than respondents who lack such skills and experiences.

Also, young workers are responding to the labor market's increasing demand for postsecondary credentials and degrees. Thirty-seven percent of the respondents reported that they have the level of education and training needed for the type of job they would like to hold in the next five years. The respondents' confidence in their education increased with each level of attainment. In addition, nearly one-third of the total respondents are currently enrolled in an education or training program. Nonstudents who are interested in additional education named financial considerations as their top barriers to enrollment.

Read the Federal Reserve report.

Builder Confidence Rose in November

Homebuilders confidence in the market for newly built single-family homes rose 4 points to 58 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The index has remained above the 50-point benchmark for five consecutive months.

All three components of the index improved in November. Present single family sales increased 5 points to 62, single family sales for the next 6 months increased 2 points to 66 and traffic of prospective buyers increased 4 points to 45.

The largest increase in the HMI was recorded in the Northeast, which increased 12 points to 51, while the West increased 7 points to 60, the Midwest increased 3 points to 56 and the South increased 2 points to 62.

“Growing confidence among consumers is what’s fueling this optimism among builders,” said NAHB Chairman Kevin Kelly. “Low interest rates, affordable home prices and solid job creation are contributing to a steady housing recovery,” NAHB Chief Economist David Crowe noted.

Read the NAHB release.