From Fidelity National Title:
The Week In Review
MONDAY, May 23rd
We are seeing a lull in the pace of recovery as $4 a gallon gas prices and supply chain disruptions from the earthquake in Japan take their toll. Severe storms and flooding in the South will show up in the data in coming weeks, adding another weight to growth. Therefore, data this week are expected to show a decline in new home sales, weaker durable goods orders and an uptick in jobless claims. Consumer sentiment and spending levels could possibly fall prey to the downshift as well.
TUESDAY, May 24th
New home sales rose 7.3% in April to an annual rate of 323k. This followed an 8.3% gain in March to an annual pace of 301k. While the level of new home sales is still weak by historical standards, at least with back-to-back gains they are moving in the right direction. Prices were better last month as well, as the median price for a new home gained 4.6% over the past year to $217,900. Be aware that the median price gain could reflect more sales of higher priced homes as opposed to actual appreciation rates. It looks like new home sales are recovering modestly and will continue to do so, given stronger job growth and high affordability. Tight credit and a still high level of distressed properties on the market remain the downside risks to the housing outlook.
WEDNESDAY, May 25th
The MBA mortgage applications index increased 1.1% to 540.8% for the week ending May 2. The purchase index was up 1.5% on the week as the refinance index gained 0.9%. Overall mortgage application activity is benefitting from falling mortgage rates in recent weeks. Contract rates fell again last week with the 30-year fixed rate dropping 9 basis points to 4.69%. Even with gains in the index in 5 out of the last 6 weeks, home financing activity has been range bound at a very low level for several years.
New orders for durable goods fell 3.6% in April led by weakness in the transportation sector; though demand for other big-ticket items declined as well. Auto production was impacted by delivery disruptions of Japanese auto parts after the earthquake and tsunami. Because of this economists expect the decline in hard goods manufacturing to be temporary and that activity in the sector will be a support to economic growth through 2011.
THURSDAY, May 26th
Jobless claims increased 10k to 424k for the week ending May 21. Initial claims have been averaging 413k a week this year compared to an average of 459k per week in 2010. The lower level of jobless claims indicates labor market improvement with a slower pace of layoffs and a moderate pace of job creation. These trends are expected to continue in coming weeks and months.
GDP was unchanged upon the second revision to first quarter economic growth. The economy grew at a 1.8% rate in Q1, less than expectations for a 2.2% rate of growth. There were adjustments in most spending categories but they did not impact the overall growth rate. This second estimate for GDP shows that the economy had little momentum at the end of the first quarter.
FRIDAY, May 27th
Pending home sales plunged 11.6% in April to 81.9%, the lowest index level since September 2010. Pending home sales which are counted when sales contracts are signed are viewed as a leading indicator of existing home sales. Volatility in pending home sales may be related to severe weather in many parts of the country last month, so could prove temporary. However, the index level suggests that home re-sales could tumble over the next couple of months.
Personal income rose 0.4% in April as consumer spending increased by the same amount. Consumer spending largely keeps pace with income growth; incomes have grown 4.4% over the past year as consumer spending rose 4.8% over that time. Stronger growth in incomes and spending would be needed as a primary driver of economic recovery.
I keep hoping that we are going to see some solid good news, but I just can't say that I am impressed with this data. I feel like I've been a broken record for the last couple of months, but while the news is disappointing, it is not the end of the world. Things seem to get a little better, then fall back a few steps. I'd really like to see the jobless claims retreat to well under the 400K mark, but that is only what I'd like to see - I'm sure there are plenty of other people out there that would like to see the same thing. I can only guess regarding the reason that we don't see more mortgage refinances is that it is just tougher to qualify for a loan and property values have caved a bit in the last few years meaning that if you have 20% equity when you last refinanced/purchased, you may not have that 20% anymore and will be subject to mortgage insurance. Summer is a few weeks away, so hopefully things will start turning around, and soon.
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