O.T. - rant time (on F.O.M.C. and interest rate policy). Check out today's data on New Home Sales (the only housing data which ends up NOT having a huge time lag) (e.g. - housing starts occur months after someone decides "let's do it").
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June 29, 1999
Sales of New Homes Decline
Amid Higher Mortgage Rates
An INTERACTIVE JOURNAL News Roundup
WASHINGTON -- Sales of new homes softened in May, as rising mortgage
rates may have kept potential home buyers at bay.
Meanwhile, in a sign of the ongoing strength of
the U.S. economy, consumer confidence rose
again in June, driven by expectations that job
opportunities will continue to increase, the
Conference Board said in a separate report.
The Commerce Department Tuesday said
new-home sales dropped 5.1% in May to a
seasonally adjusted 888,000 annual rate, from a
revised 936,000 in April. The government
originally estimated the April figure at 978,000.
Analysts on Wall Street expected May sales to fall to a 950,000 rate from the
preliminary April number, according to a Dow Jones-CNBC poll of 14
economists.
Rising mortgage rates, typically a harbinger of softer home sales, have
increased lately, according to Freddie Mac. The rate on a conventional 30-year
mortgage reached 7.15% in May from 6.92% in April, the company said.
Meanwhile, the Conference Board's consumer-confidence index rose for the
eight consecutive month in June to 138.4 from a revised 137.7 in May.
The present situation index declined to 173.5 from 177.2 in May, while the
expectations index advanced to 114.9 in June, rising from 111.3 in May.
The report by the New York business-research group noted that consumers
continue to be confident that employment opportunities will increase. About
46% of respondents said that jobs are plentiful, down slightly from 48% in
May. However, consumers are optimistic that more jobs will open up, with
18% looking for more jobs to be available in the next six months, versus 16%
in May.
"Great expectations are continuing to fuel consumer confidence," said Lynn
Franco, associate director of the Conference Board's research center. "While
recent gains in confidence are modest, consumers now account for almost
70% of U.S. economic growth, and current confidence levels point to even
stronger economic growth next year than previously expected."
Meanwhile, economists said the housing market remains strong despite recent
increases in mortgage rates and the decline in sales of new homes last month,
The competitive U.S. job market, healthy wages and high equity prices
continue to fuel growth in the sector this year. Single-family housing starts
jumped 12.8% in May to a 1.409 million annual rate, the Commerce
Department said earlier this month, the highest level in more than two decades.
The National Association of Home Builders' monthly index hovered at a
near-record level in June.
Still, analysts expect a slowdown in the housing market and some recent data
indicate the sector may be beginning to cool. Existing-home sales, as measured
by the National Association of Realtors, dipped 4% in May after a 3.1% decline
in April.
Sturdy demand for homes has kept the supply of available houses below five
months for 29th consecutive month. The inventory of homes for sale rose to
4.3 months' supply in May from 3.9 months in April. The May level is the
highest since December 1997.
Home prices moderated in May after rising in April. The average price of a
new home fell to $185,100 during the month from $189,100 in April. The
median home price sank 5.7% in May to $149,900, the lowest level since July
1998.
The powerful domestic housing market has helped the U.S. economy expand
at a torrid pace, growing 4.3% in the first quarter after surging 6.1% in the
final three months of 1998. That rapid rate has Federal Reserve policy makers
worried the economy's expansion, amid high employment, will trigger inflation
down the road. As a result, the Fed's Open Market Committee, meeting
Tuesday and Wednesday, is widely expected to boost the target for the
federal-funds rate, at which banks lend to each other overnight, by a quarter of
a percentage point to 5%.
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