MORE GOOD NEWS FOR HOUSING

 

Existing Home Sales for March fell by 3.05% to 4.57 million, somewhat larger drop than expected. However, inventory of homes available for sale slipped by 1.6% to 3.737k, that is 9.3% below its year ago level. This is a 9.8 months supply compared to last November’s 11.0 months supply. The rate of decline is slowing and inventory is shrinking.

It is estimated that about half of these sales are distressed and continue to place downward pressure on both prices and new construction. The other half of these sales were to first-time buyers.

New Home Sales fell by 0.6% in March to 356k. This is a bit higher than estimates and February’s numbers were revised up from 337K to 358K. Inventory of new homes available for sale dropped by 5.2% to 311k. This is 33.7% below its year ago level and 45.6% below its July 2006 peak level. The supply has been steadily declining over the past months, from a January record of 12.5 months to February’s 11.2 and now March’s 10.7. While this is 2.5 times the 4.0 average for the 5 years ending in 2005 it is an encouraging trend.

The MBA Mortgage Applications Index is another bright note. It rose by 5.3% during the week ending April 17. Applications are now 83.8% above their year ago level.

While the Purchase Index fell, affordability is rising and pent up demand appears to be emerging, reflected in the number of first-time homebuyers in the condo market.

Year/Year home sales are improving in highly impacted markets including Las Vegas, Phoenix, Minneapolis and most areas of North Virginia, California and Florida.

The Refinance Index rose by 7.7% and is now 186.1% above its year ago levels. Refinance accounts for about 80% of all new mortgage activity, a real benefit of continued low mortgage rates.

A remaining rub for housing continues to be declining prices from both inventory overhang and mounting foreclosures.

Collectively, the housing indicators suggest a bottom may be at hand.

 

WEEK OF APRIL 27th

 

Consumer confidence for April comes out Tuesday and it should increase for the second straight month.  Analysts believe it will hit 28.8 — up from 26 in March and February’s all-time low of 25.

One of the most important reports — advance 1stquarter GDP — will be released Wednesday, and it’s expected to drop 4.9%.  However, two revisions follow and further declines are expected.  Final 4thquarter GDP fell -6.3%.

Thursday is the busiest day for reports, beginning with first-time jobless claims for the week ended April 25.  They’ve been up and they’ve been down but remain too volatile to establish a trend.  Most economists, however, see job losses rising into next year.

We also get personal income and personal spending for March, which should be little changed from February.  Income is expected to fall 0.2%, matching the previous data.  Personal spending, however, could show slight improvement.  It is predicted to decline 0.1% — a tad better than the previous 0.2% dip.

The 1stquarter employment cost index (ECI) should make no waves.  This index monitors the cost of wages, salaries and benefits paid by employers.  It is expected to rise 0.5%, just as it did in the 4thquarter.

Thursday’s final report, the Chicago PMI manufacturing index for April, is expected to rise to 34 from 31.4.  This would be the first increase in several months.  The national counterpart of that index, the ISM report on manufacturing nationwide, follows on Friday and it, too, is predicted to rise to 38.0 from 36.3.  If these reports come in on target they would provide a small ray of hope for the hard-hit manufacturing sector.

Unfortunately, factory orders, which rose 1.8% in February, are expected to turn negative in March, falling 0.7%.  Friday’s last report, the University of Michigan/Reuters’ final consumer sentiment survey for April, should not change much.  Analysts believe it will come in at 61.5, which is a tad below the 61.9 of two weeks ago.

 

 This last week of the month features a number of key reports and a statement by the Fed after its Wednesday meeting.  Although no rate change is expected, the markets want to hear the Fed’s assessment of economic conditions, its outlook and its plans to buy more Treasuries in order to hold lending rates down.

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