While cold winter weather continues to assail much of the country, last week saw some sunnier economic headlines as real estate and jobs performed better, and new data pointed to growing economic strength.
Existing Home Sales
One look at last week’s real estate market shows the cold weather is continuing to have its impact on housing, but is the weather the whole story? Sales of existing single-family homes, townhomes, condominiums and co-ops, dropped 5.1 percent to a seasonally adjusted annual rate of 4.62 million in January from 4.87 million in December, the National Association of Realtors reported last week.
This was the lowest level in a year and a half - 5.1 percent below January 2013’s 4.87 million-unit pace. While it would be easy to chalk up the drop entirely to the difficult weather, NAR chief economist Lawrence Yun described the various factors at play.
“Disruptive and prolonged winter weather patterns across the country are impacting a wide range of economic activity, and housing is no exception,” he explained. “Some housing activity will be delayed until spring. At the same time, we can’t ignore the ongoing headwinds of tight credit, limited inventory, higher prices and higher mortgage interest rates. These issues will hinder home sales activity until the positive factors of job growth and new supply from higher housing starts begin to make an impact.”
Looking at prices, January’s median existing-home price for existing homes of all types grew to $188,900, up 10.7 percent from January 2013. Total housing inventory for January rose 2.2 percent to 1.9 million existing homes for sale, which represented a 4.9-month supply at January’s sales pace. Unsold inventory was 7.3 percent higher than a year ago.
And while new real estate construction sought to fill in the necessary inventory (which would help keep prices down), the cold weather had an impact as well. Building permits issued for construction of private housing dropped 5.4 percent in January to an annual total of 937,000, according to last week’s report from the Census Bureau. Permits for single-family home construction in January dropped 1.3 percent to a rate of 602,000.
Starts on construction of private housing were significantly down, dropping 16 percent in January to an annual total of 880,000. Starts on single-family homes fell a nearly identical 15.9 percent to a total of 573,000.
All that said, completed construction on private homes actually grew 4.6 percent in January to an annual rate of 814,000. Completions on single-family housing increased 3 percent in January to reach a total of 580,000.
Initial Jobless Claims
A bright spot in last week’s economic news was a reduction in new jobless claims. First-time claims for unemployment insurance filed during the week ending Feb. 15 by the newly unemployed, dropped by 3,000 claims to 336,000, the Employment and Training Administration reported last week. That said, the four-week moving average, which is considered a more stable measure of short-term unemployment activity, grew by 1,750 claims to 338,500.
If the economy is indeed experiencing a drop in job losses, that could spell an improving job market. When employers hold off on lay-offs, that could point to actual growth in jobs.
“I think the fundamentals for stronger job growth are in place,” Moody’s Analytics Inc. senior economist Ryan Sweet told Bloomberg. “We’re going to get some of the jobs that weren’t added in December and January because of weather.”
Sweet added that growth might not come until March.
Leading Economic Indicators
If the real estate and jobs reports are pointing to increasing strength, that would jibe with The Conference Board’s latest Leading Economic Index, which compiles various key pieces of economic data in manufacturing, jobs, real estate, the stock market and credit. The LEI for the United States grew by 0.3 percent in January to 99.5 (based on a baseline of 100 set in 2004), the Board reported last week.
“The U.S. Leading Economic Index continues to fluctuate on a monthly basis, but the six-month average growth rate has been relatively stable in recent months, which suggests that the economy will remain resilient in the first half of 2014 and underlying economic conditions should continue to improve,” said Ataman Ozyildirim, economist at The Conference Board.
“The increase in the Leading Economic Index reflects an economy that is expanding moderately, although the pace is somewhat held back by persistent and severe inclement weather in most parts of the country,” added Conference Board Economist Ken Goldstein. “If the economy is going to move on to a faster track in 2014 compared to last year, consumer demand and especially investment, will need to pick up significantly from their current trends.”