Weekly Economic Update - Patience Rewarded

The Census Bureau and the Bureau of Economic Analysis have begun to catch up on economic and housing data reports delayed because of the partial government shutdown. First out of the gate was the Census Bureau’s new home sales report for November, originally scheduled for release at the end of December. It might have been worth the wait.

After posting declines almost every month since May, new home sales shot up 16.9% from October to 657,000 annualized units, while the October report was also revised higher by about 20,000 units. The lackluster performance through late spring and summer, however, leaves sales down by 7.7% year-over-year.

Results in three of the four regions were also spectacular; the Northeast was up 100%. Contract signings in the West though fell by 5.9% and are down 25.9% for the year.

More good news; a marked decline in the prices of the homes sold. The median was $302,400 compared to $343,400 in November 2017, while the average fell from $388,500 to $362,400.

Then there was the pending home sales report. The Pending Home Sales Index (PHSI), a measure of signed purchase contracts, dipped 2.2% in December to 99.0, lower than its 2005 benchmark of 100 and was 9.8% lower than a year earlier. The National Association of Realtors said December marked the 12th month that its index failed to improve on an annual basis.

Pending sales were down from December 2017 in all four regions, but the Northeast managed a monthly gain as did the West, its second in a row.

And Patience Is Still The Word

Freddie Mac’s Economic Research Group rolled back its predictions for Federal Reserve rate hikes to only one in 2019. The company’s January forecast predicts the federal funds rate will average 2.3% this year and 2.5% throughout 2020. Right on cue, the Federal Open Market Committee, which wrapped up its January meeting on Wednesday, held rates constant and said they would be “patient” about deciding their next moves.

Freddie Mac’s economists also say that the gradual decline in mortgage rates, from a seven-year high in November to a nine-month low of 4.45% last week, is not a fluke. They now expect the 30-year fixed-rate to average 4.7% and 4.9% in 2019 and 2020, respectively. The moderation of mortgage rates should, the forecast says, offer some relief to the previously strained housing market.

02.01.2019

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