The Mortgage Corner
Just as existing-home sales are at their cyclical highs, the Commerce Department on Friday said new home sales increased 5.2 percent to a seasonally adjusted annual rate of 592,000 units last month. That was the second highest pace since 2007, said the NAHB. Economists had forecast single-family home sales, which account for about 9.5 percent of overall home sales, rising 2.1 percent to a 575,000-unit rate last month.
The real problem is still lack of inventory with just 5.1 months of available supply (red line in graph), but builders optimism is the highest since 2005 that they can increase that inventory with a better mix of more affordable housing. Sales rose 16.5 percent from a year ago, boosted by a 43.8 percent jump in the Midwest to a nine-year high. Sales surged 7.7 percent in the West, their highest level since January 2008, but fell 3.1 percent in the South. They were unchanged in the Northeast.
“NAHB expects an increase in single-family home construction next year, fueled by a growing economy and solid job growth,” said NAHB Chief Economist Robert Dietz. “Moreover, builder confidence has risen on anticipation of reductions in regulatory costs, which is good news for home buyers and renters. However, the pace of construction will continue to be restricted by shortages of lots and labor in some markets.”
And consumers are feeling much more confident since the November elections, with most of the jump in older respondents to both the University of Michigan and Conference Board surveys. They are putting a lot of faith that Prez-elect Trump will be able to carry out his election promises of draining the Wall Street/DC swamps, in other words.
That said, the U. of Michigan consumer sentiment index edged up to a reading of 98.2 from 98 earlier this month. That was the highest reading since January 2004. And the Conference Board’s confidence index is up 12.9 points since the November election in gains driven by older consumers, as we said. The level for December is 113.7 which is the highest reading since way back in August 2001.
The University of Michigan said a record 18 percent of respondents "spontaneously mentioned the expected favorable impact of Trump's policies on the economy." Consumers anticipated that a stronger economy would create more jobs, with the share expecting higher income rising to a one-year high.
And personal incomes are rising at a 4 percent clip, the unemployment rate has dropped to 4.6 percent, and GDP growth is now up to 3.5 percent in the third revision to Q3 growth, with fourth quarter GDP growth also looking good.
So why shouldn’t consumers feel more confident of the future? It has a lot to do with Republican policies in Congress, yet Repubs say they want to repeal much of Obama’s legacy, which created the recovery from the Great Recession—the worst recession since the Great Depression. And a repeal of Obamacare and Dodd-Frank, the law that is attempting to reign in some of the excesses that caused the Great Recession, could put US back into another recession.
In other words, those voters need to be careful of what they wish for beyond the Twitters of Prez-elect Trump.
Harlan Green © 2016
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