Lots of items to cover this week from home sales and prices to homeownership and the Fed.
It was a week of bits and pieces rather than any major news. Home sales, prices, and some broader economic indicators all had a brief turn on the stage.
Pending home sales finished up 2017 with a third consecutive gain. The National Association of Realtor’s Pending Home Sales Index (PHSI), a forward-looking indicator of existing home sales one or two months ahead, was up 0.5% both from November and the previous December. It was the highest reading for the PHSI since last March.
The last two home price reports for November were more of the same. Black Knight’s Home Price Index rose 0.27% from October and 6.44% year-over-year and the S&P Case-Shiller National Index posted 0.7 and 6.2% gains, respectively.
Eleven months into the year it is clear from all four major price indices that 2017 will finish up with an annual gain of at least 6.2% and probably higher.
The homeownership rate continued to stumble along in the fourth quarter of 2017. It has moved little after finally ending a decade-long slide at 62.9% six quarters ago. The Census Bureau says the portion of Americans who own homes is now 64.2%. However, it is encouraging that the age group making the greatest gain in the last year was those under 35--the Millennials. Their rate ticked up 1.3 points compared to the fourth quarter of 2016. It is still only 36.0%, but at least it is moving in the right direction.
The fourth quarter GDP came in at 2.6%, a little lower than the anticipated 2.9%, but the headline number hid even better news. Consumer spending, a very important component, was up 3.8% which included a 14.2% increase in spending on durable goods. Residential investment, the category for new residential construction, remodeling, and landlord expenditures, was up an annualized 11.6%. It was net exports and flat spending on inventories that punched a hole in the number.
The Federal Reserve’s Open Market Committee (FOMC) finished up its final meeting under Fed Chair Janet Yellen on Wednesday, with a unanimous vote to hold the fed funds rate steady at 1.26 to 1.5%. Yellen will be replaced by Jerome Powell, a member of the Fed’s Board of Governors since 2012.
In its after-meeting statement, the FOMC said labor market and economic activity had both improved since the group’s December meeting, but both overall inflation and inflation for items other than food and energy continue below the Fed’s target 2% rate. They did not set any dates for additional rate hikes--most economists expect there will be two or three this year--but it seems clear inflation will be the key.
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