{"id":1533,"date":"2019-05-21T11:18:16","date_gmt":"2019-05-21T15:18:16","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1533"},"modified":"2019-05-21T11:18:16","modified_gmt":"2019-05-21T15:18:16","slug":"april-existing-home-sales-and-may-philadelphia-fed-nonmanufacturing-activity","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1533","title":{"rendered":"April Existing Home Sales and May Philadelphia Fed NonManufacturing Activity"},"content":{"rendered":"\n

KEY DATA:<\/strong> Sales: -0.4%; Median Prices\n(Over-Year): +3.6%\/ Phil. Fed: -3.7 points; Orders: -14.8 points<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cDespite months of declining mortgage rates,\nthe housing market is just not coming around.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong>  It just doesn\u2019t seem to be happening in the\nhousing market.  Mortgage rates, which\nhit their highest rate in nearly eight years in November, have declined\nsteadily since then.  Yet there are no\nsigns that buyers have reacted significantly to the drop.  The National Association of Realtors reported\nthat sales of existing homes eased in April. <\/em><\/strong> That makes two months in a row now that demand\nwas off.  Two months doesn\u2019t make a\npattern, but when you look at sales over the year, it was off by 4.4%, which is\nnot good news.  Indeed, so\nfar this year, the sales pace is running about 2.5% the rate posted in\n2018.  That is really discouraging since\nmortgage rates have been below last year\u2019s average.<\/em><\/strong>  In April, moderate weakness in the Northeast\nand a modest decline in the Midwest were largely offset by a relatively mild\nincrease in the West.  In other words, there\nwere no regions that showed either large increases or decreases, indicating\nthat sales were not greatly impacted by the dreaded \u201cweather issue\u201d.  <\/em><\/strong>As for prices, they continue to rise,\nbut the gains are moderate.  There\nwas one good piece of data in the report: Inventories are rising. <\/em><\/strong> Since so much has been made of the last of\nsupply holding down sales, maybe with more homes on the markets, buyers\nwill be able to find the home of their dreams – or at least one they can live\nwith or in.<\/em><\/strong><\/p>\n\n\n\n

With manufacturing output faltering, it is\nimperative that the service side of the economy holds up if growth is to remain\nsolid.  <\/em><\/strong>Well, it is not clear how\nmuch that is happening. The Philadelphia Fed\u2019s nonmanufacturing\nindex was down during May, led by somewhat slower growth in new orders.<\/em><\/strong>  But this report was not all negative.  Employment and investment remained strong\nand optimism increased sharply.  <\/em><\/strong>Indeed,\nabout 65% of the respondents expect their own business activity to grow over\nthe six months while only 8% expect it to decline. <\/p>\n\n\n\n

MARKETS AND\nFED POLICY IMPLICATIONS:<\/strong>  Eventually,\nthe economic data will actually matter again, but I suspect for a while only\nthe really major and wildly unexpected reports will make a sound in the market\nforest.<\/em><\/strong>  The puppet master has\ncontrol and investors have tunnel vision. \nThat is fine as long as the economy continues to grow decently.  And there is every reason to think that will\nbe the case for quite a while.  Job gains\nare strong, incomes are rising and inflation is not destroying spending power\ncompletely.  Meanwhile, dividends\nare hitting record highs and coupled with the massive buybacks, the crutches\nsupporting the markets continue to keep things from falling apart.  But the buybacks are waning and the ability\nto maintain the dividends will depend upon earnings and that means the economy\ncould come back into play, maybe sooner than many believe.<\/em><\/strong>  That should give investors pause.  Strong growth is needed and that means wage\ngains will be key.  There is little reason to think that\nwith companies already having committed so much of their tax cuts to buybacks\nand dividends, capital spending will surge. \nIn addition, fiscal policy is largely off the table<\/em><\/strong>, especially\ngiven the war between the president and the Democrats.  But if wage gains don\u2019t accelerate, and they\nhave been decelerating lately, consumer demand will not surge.  That means earnings could falter.  And if they do rise faster, margins could narrow.  In other words, there are real risks to\nmarket values<\/em><\/strong> and I haven\u2019t even mentioned the Long March on trade the\nChinese say they have started. The Chinese have long memories and even if\nan agreement is reached, be it more puff than pastry or not, they will not\nallow themselves to be put in a position of weakness again.<\/em><\/strong>  Over the next few years, they are likely to\nde-link themselves s from key relationships and that cannot be good for some\nU.S. companies or sectors.  <\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA: Sales: -0.4%; Median Prices (Over-Year): +3.6%\/ Phil. Fed: -3.7 points; Orders: -14.8 points IN A NUTSHELL:  \u201cDespite months of declining mortgage rates, the housing market is just not coming around.\u201d WHAT IT MEANS:  It just doesn\u2019t seem to be happening in the housing market.  Mortgage rates, which hit their highest rate in nearly … Continue reading April Existing Home Sales and May Philadelphia Fed NonManufacturing Activity<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-1533","post","type-post","status-publish","format-standard","hentry","category-economic-indicators"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1533","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1533"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1533\/revisions"}],"predecessor-version":[{"id":1534,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1533\/revisions\/1534"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1533"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1533"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1533"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}