This week’s data feature looks at areas that have started out the year with the strongest price gains.  It is still widely estimated that home prices on a national level will continue to ease, but these locales are on pace to buck the trend.  According to data from Housing IntelligencePro, the Cape Coral-Fort Myers, FL region saw median home prices increase almost 20% from January of last year.  Home prices in the region likely rebounded as the local economy is slowly recovering and distressed properties are now garnering demand from both primary homebuyers and investors alike.  Three out of the top-six markets were in the state of Texas with San Antonio and Austin at #2 and #3, respectively and Dallas at #7.  The state of Oklahoma was also well-represented with Oklahoma City ranked #4 and Tulsa ranked #5.  The criteria were that markets needed to record at least 500 total new and existing home closings in the month of January to be considered.

The economy is currently at a crossroads with a slowly improving employment picture running into resistance caused by three major factors.  First, rising commodity prices in food, energy, and precious metals are raising concerns about inflation.  Second, a federal budget dispute which threatens a government shut-down.  And lastly, the possibility of weaker global economic growth due to sovereign debt woes over in the EU, natural disasters in Japan, and rising interest rates in China.

March employment figures showed some encouraging signs of labor market improvement.  Private sector employment growth in the past couple of months was the strongest it has been in 5 years which provides some evidence that the U.S. labor market is steadily improving, albeit slowly.  Continued declines in initial jobless claims are a positive sign that employment figures will continue to improve in the coming months.  It is still a long road ahead to a full recovery but it’s a good start.

Rising food and energy prices are also starting to negatively impact consumer confidence.  The Conference Board’s Consumer Confidence Index in March declined from the first time since September.  Consumer spending makes up over two-thirds of GDP so any large pullback can put a halt to economic growth domestically.  A third straight month of noticeable gains in the PCE price index was further evidence that inflation is starting to rear its ugly head.  It may not be an immediate concern but if oil prices continue to increase into the summer months, look for more aggressive language from the Federal Reserve.

The Economy
The Labor Department reported last Friday that total non-farm employment in the U.S. increased by a seasonally-adjusted 216,000 payrolls in March.  This is the strongest payroll growth for any month since May 2010.  Gains in private sector employment fueled growth in March while losses in the government sector were amongst the biggest drags on the labor market.  The private sector has added over 200,000 payrolls in each of the past two months which is the strongest growth for the sector since 2006.  However, budget woes continue to drag on public sector employment and will remain a threat to a full recovery for the labor market going forward.

The unemployment rate in March edged slightly lower to 8.8% from 8.9% in February.  This is the lowest the unemployment in the U.S. has been since March 2009.  It is also the fourth consecutive month that the unemployment rate has declined.  Despite the recent improvement, many economists still expect the unemployment rate to edge higher in the months ahead because workers who previously exited the labor force are expected to return as the economy and the labor market continue to gradually improve.

Consumer confidence fell to 63.4 in March compared to a reading of 72.0 last month.  This is the first month that the consumer confidence index has recorded a decline since September 2010.  Consumer confidence is now back to its lowest levels since December.  The number of people surveyed that plan to buy a home within the next 6 months declined to 3.8% from 4.9% while the portion that plans to buy a new home fell to 0.4% from 1.0% last month.

Personal incomes in February increased to $12,961.3 billion compared to a revised figure of $12,923.2 billion in January.  This is the fifth straight monthly increase for personal incomes.  Personal incomes are up 5.1% from $12,337.2 billion in February of last year.  This is the strongest year-over-year increase for personal incomes in any month since June 2008.  Personal incomes have now recorded 15 straight months of year-over-year gains.

The personal consumption expenditures (PCE) price index, which is a leading gauge for inflation, increased 0.4% from the previous month.  This is the third straight month that the PCE price index has recorded an increase of 0.3% of more.  The PCE price index excluding food and energy increased 0.2% from last month.  This is the second straight month that it has recorded a 0.2% gain.

First-time unemployment claims declined by 10,000 to a seasonally-adjusted 382,000 in the week ended April 2nd from an upwardly revised figure of 392,000 last week.  This is the third straight week that first-time jobless claims have declined and the fourth consecutive week that they have remained under the 400,000 level.  The continued decline in first-time jobless claims suggest that labor market conditions will continue to improve going forward.

Housing Market
The National Association of Realtors’ Pending Home Sales index, which is a forward-looking indicator of housing activity based on sales contracts signed, increased 2.1% from the previous month to a reading of 90.8 in February from a reading of 88.9 in January.

National average mortgage increased slightly from the previous week to 4.87% in the latest Primary Mortgage Market Survey released weekly by Freddie Mac on April 7th.  This is the third straight week that mortgage rates have increased.  However, the 30-year fixed-rate mortgage has still averaged under 5.0% for seven consecutive weeks.

In the week ending April 1st, the MBA’s seasonally-adjusted purchase index increased 6.74% from the previous week and was still down 17.41% compared to the same time last year.  This is the highest the purchase index has been since the end of last year.

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