KEY DATA: New Homes: +0.7%/Pending Sales: -1.1%/Consumer Comfort: up 2.2 points

IN A NUTSHELL:   “The housing market is marking time but improving consumer confidence may be coming at just the right time.”

WHAT IT MEANS:  The housing market has been adding to growth since the winter wipeout but the impact has slowed.  That trend may be continuing.  New home sales did increase a touch in October, but only because the September pace was revised downward.  Builder confidence has been rising so the small gain, though better than some thought, was a surprise to me.  The level of purchases has been in a tight pattern for the past three months and it is still below 500,000 a month, annualized.  Strong sales would be around one million, so the sector has a long way to go.  Demand was strong in the Northeast and Midwest but off in the South and West.  Prices, however, did surge.  The high end of the market looks like it may be coming back.

Pending home sales, which are signed contracts for existing homes, dropped in October.  There were declines in all regions except the Northeast, which posted a modest rise.  This does not bode well for existing home sales, which are likely to rise minimally, if at all,

On a positive note, The Thompson Reuters/University of Michigan consumer sentiment index rose in November.  That was in sharp contrast to the large decline posted by the Conference Board’s confidence index.  There was a small fall off from the mid-month reading, but sentiment hit a level not seen in more than seven years.  Both current conditions and expectations were up.  This report is also supported by an increase in the Bloomberg Consumer Comfort Index to its highest level since December 2007. 

MARKETS AND FED POLICY IMPLICATIONS: Housing is just not improving very much at all.  But while it is critical that this market get going, for the holiday shopping season, the consumer numbers are what really matter.  I had mentioned in my commentary on the Conference Board’s confidence number that the decline made little sense.  That two other reports point to improving confidence is more in line with logic.  But logic and household perceptions don’t necessarily go hand-in-hand so we have to be a little uncertain about what people are thinking.  If confidence is rising, which I tend to think it is, then we could be in for a very good fourth quarter spending number.  That is what we really need.  So on that note, let me say to everyone:

Have a Happy Thanksgiving!