Last week was very light on economic news with just two housing releases of note. Existing home sales rose, but when compared to a year ago the sales rate is slower and inventory levels are higher. At least part of the issue slowing sales is the fact that mortgage rates are up over 25 percent in the last year. New home sales held up better than existing, but the new home market is about one tenth the size of the existing homes market. In the absence of economic releases a speech by NY Federal Reserve President Dudley got quite a bit of attention for his insight on how the Fed might exit the quantitative easing and his view of longer-term interest rates.
This week is much busier starting out with Durable Goods & house prices and ending with Personal Spending and Consumer Confidence.
Finally, if you want a thought-provoking read, non-economics related, I highly recommend the Commencement speech given by Admiral William McRaven at the University of Texas this month.
News of Note
- The FOMC released the minutes from the April meeting last week, which did not provide much additional insight. In contrast NY Fed President William Dudley gave a speech last Tuesday which drew quite a bit of attention. He did expect the economy to get back to around 3 percent growth this year, but believed that long-term rates would remain lower than historical average because 1) as a result of the last recession individuals and businesses will likely save more as spend less, 2) the demographics of an aging population will slow down growth in the labor force, and 3) increased bank regulation will require higher capital and in turn push down the Fed Funds Rate. Tim Duy’s Fed Watch has a nice write-up and analysis of the speech.
- Initial unemployment claims for the week ending May 17 increased 28,000 to 326,000. The four week moving average of 322,500 was down 1,000 from the previous week.
- Existing home sales increased 1.3 percent to a 4.65 million SAAR (Seasonally Adjusted Annual Rate) in April, but were 6.8 percent below the sales rate a year ago. Inventory increased 16.8 percent to 2.29 million, which is 5.9 months supply at the current sales rate. Compared to last year listed inventory is 6.5 percent higher. The median sales price in January was $201,700, a 8.3 percent increase compared to last year, and distressed homes made up 15 percent of the sales. The nation average commitment rate for 30 year mortgages was 4.34 percent in A, up from 3.45 percent the same month last year.
- New home sales increased 6.4 percent in April but were 4.2 percent below the same month in 2013. Sales were at a seasonally adjusted annual rate (“SAAR”) of 433 thousand compared to 407 thousand in March. Current inventory was 192 thousand homes which was 5.3 months of supply at the current sales rate.
Sources McRaven to Grads: To Change the World, Start by Making Your Bed, Alcalde, May 17, 2014 http://alcalde.texasexes.org/2014/05/mcraven-to-grads-to-change-the-world-start-by-making-your-bed/  Minutes of the Federal Open Market Committee April 29-30, 2014, http://www.federalreserve.gov/newsevents/press/monetary/20140521a.htm  The Economic Outlook and Implications for Monetary Policy , William C. Dudley, President and Chief Executive Officer, Federal Reserve Bank of New York, May 20, 2014 http://www.newyorkfed.org/newsevents/speeches/2014/dud140520.html  Dudley Revisits Exit Strategy, Tim Duy’s Fed Watch, May 20 2014, http://economistsview.typepad.com/timduy/2014/05/dudley-revisits-exit-strategy.html  Unemployment Insurance Weekly Claims Report, U.S. Department of Labor, May 22, 2014, http://www.dol.gov/ui/data.pdf  April Existing-Home Sales Show Modest Improvement Behind Gaining Inventory, National Association of Realtors, May 22, 2014, http://www.realtor.org/news-releases/2014/05/april-existing-home-sales-show-modest-improvement-behind-gaining-inventory  New Residential Sales, U.S. Census Bureau, May 23, 2014, http://www.census.gov/construction/nrs/