Gee, it has been a while since we had a week like this on the economic front. With the exception of mortgage rates declining slightly, and the retail sales report coming in better than expected, the bulk of the economic data and market news this week has been pretty disconcerting.
The week started off with a jump when the retail sales report came in much stronger than expected for the month of March. Auto sales had a larger than expected increase as well as pretty much all of the broader measures of sales resulting in a total rise of .8%, far higher than the expected .3%. Good news, consumers are still spending money.
After seven months of straight gains, the home builders' housing market index declined. All three components are down this month with the greatest decline, in what is a clearly not a good sign, is the slowing of incoming buyer traffic. For months we have seen an increase in activity however March seems to have slowed, which is unusual for this time of year.
Following suit is the decline in existing home sales for March which came in softer than expected. In February we saw a decline of .6% where as March dropped a much larger than expected 2.6%. Unfortunately the signs of buyer apprehension are showing up in various parts of the country.
There is one possible argument that housing may not really be as bad as the recent reports indicate. Throughout the U.S. almost every region had a much warmer winter than normal. Some believe that the atypical weather which attributed to better than expected housing reports throughout the winter may be in fact catching up to us now. If a lot of the building and selling took place earlier than normal, then it is possible that the recent declines can be a reflection of that. The one redeeming part of the housing report is for those involved in residential real estate. The report clearly indicated that the bulk of the decline was in the multifamily sector. Single family homes edged down only slightly. Additionally, the report also shows that existing sales are up 5.2 percent from the same time last year.
Mortgage applications for purchases, which spiked at the end of March mostly related to the scheduled premium increase on FHA loans, slipped back for a second week. Purchase applications declined 11.2 percent while refinance applications rose 13.5 percent. This just goes to show that there are people that still have yet to refinance, and that borrowers are very sensitive to slight movements in mortgage rates in either direction.
Not sure if this is good news or bad news but I will report it none the less. A story on CNNMoney.com predicts that shorts sales will increase 33% this year. The fact that more lenders are working faster with struggling homeowners, as well as being more willing to negotiate on the price of homes, may help to move inventory off the market. On the one hand this will help reduce the number of homes for sale, on the other hand nobody knows how this will really impact home values.
Last but not least, the recent trend of improving first time jobless claims has come to a halt. The last two weeks of claims have seen a net increase of 24,000 putting us back up to 386,000 claims. The last two weeks of reports are the highest so far this year.
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