| Key Indicator Summary - Looking for Direction |
| Written by Ken Lee | ||||||||||||||||||||||||||||||||||||||||
| 06.25.2009 | ||||||||||||||||||||||||||||||||||||||||
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After plunging on Monday due to renewed concerns of a global economic slowdown, Wall Street rebounded on Thursday thanks to slightly better economic news and bargain hunters jumping back into the market to capitalize on early-week declines. The broader S&P 500 Index finished up over 2% on Thursday to 920.26 which is practically where it stood at the end of trading last week. Markets sold off on Monday when the World Bank revised its estimates lower for the world economy to 2.9% contraction compared to a previously estimated 1.7% drop. The Fed also concluded a two-day meeting on Wednesday which resulted in the target Fed Funds rate remaining unchanged at the 0 to ¼ point range. The Fed statement also noted that their view on inflation remains “subdued” and the recent rise in crude may have eased concerns of deflation. The housing market got a little boost this week from better than expected existing home sales figures along with increases in both new and existing median home prices. While the recent rise in mortgage rates and home prices have caused affordability to fall from all-time highs, stabilizing prices are positive for the housing market and may start to force potential buyers to act quicker before rates and prices move even higher. While the Fed continues to buy up U.S. Treasuries, mortgage rates have crept up in recent weeks. The Federal Reserve Bank of New York purchased another $3.249 billion in Treasuries on Thursday although average national mortgage rates have posted weekly increases in four out of the past five weeks. June employment data to be released next Thursday will give us a better picture on where a recovery stands as we hit midway point in the year. The Economy Final estimates for first quarter gross domestic product showed another dismal quarter for the U.S. economy but came in better than previous estimates had suggested. GDP estimates improved with every revision in the first quarter. After recording its worst contraction since the first quarter of 1982 in the final quarter of last year, the economy contracted 5.5% during the first quarter compared to 5.7% contraction in preliminary estimates and a 6.1% drop in advance estimates. This was the first time since 1975 that the economy has contracted for three consecutive quarters. Improvements in business spending and government spending along with bigger declines in imports helped to ease the pullback in economic performance during the first quarter. Housing Market Both new and existing home prices posted gains in May while existing home sales continued to rebound but new home sales eased slightly. Improvements in both inventory and pricing for the new and existing home markets in May are positive signs for a housing recovery. New home sales eased a slight 0.6% in May to a seasonally adjusted 342,000 homes from a downwardly revised April figure of 344,000. Sales for the previous three months were also revised lower by 32,000 units. In May, new home inventories declined to 289,000 from an April figure of 298,000 on a non-seasonally adjusted basis. Non-seasonally adjusted units of unsold inventory have not recorded a monthly increase since May 2007 and are now at their lowest levels since April 2001 as builders continue to scale back building activity. There are now 10.2 months of supply on a seasonally-adjusted basis based on the current sales pace which is the lowest it has been since July 2008. In May, median new home prices increased to $221,600 from a revised April figure of $212,600. Median new home prices increased 4.2% from last month but are still down 3.4% from the same year-ago period. Rising rates and prices pushed new home affordability down for the second straight month in May after hitting an all-time high in March. Annualized sales of total existing homes in May increased 2.4% from April levels to 4.770 million units. This was the first time since January-February 2007 that existing home sales have posted consecutive month-over-month gains. Sales of existing homes are still down 3.6% from the 4.950 million units in May 2008. Median existing home prices in May increased to $173,000 from $166,600 in April. This is the highest median existing home prices have been since December. Existing home inventory declined from the previous month as lower prices helped to spur buying activity and reduce the number of homes for sale. Inventory of existing homes declined 3.53 percent to a preliminary 3,798,000 units from 3,937,000 units in April. At the current sales pace, there are 9.6 months of supply of existing homes on the market. Months of existing home inventory are back to the lowest they have been this year. National average mortgage rates increased from the previous week to 5.42% in the latest Primary Mortgage Market Survey released weekly by Freddie Mac on June 25th. Average fixed mortgage rates have posted increases in four out of the past five weeks. In the week ending June 19th, the MBA’s seasonally-adjusted Purchase Index increased to 280.3 from 261.2 in the previous week. This is the highest the purchase index has been since the week ending April 4th. It is also the tamest annual drop in the purchase index since the last week of 2008. The latest figure reflects a 7.31% increase from last week but a 15.93% drop from the same period last year. For market-level data and analysis please visit Hanley Wood Market Intelligence. For more detailed information on the indicators discussed in this key indicator alert, please visit the following links:
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