Mixed bag this morning on the data front. Jobless claims came in better than expected at 530K. Analysts had expected claims of 545K. There is a clearly positive (albeit slow) trend developing in the jobs market.
The more important data this morning was in the housing market. The strong seasonal trends we have often discussed here at TPC appear to be reversing course. The first signs of this came in lumber prices. We’re now beginning to see this spill over into the real purchasing data. Sales of existing homes declined 2.7% in August to 5.1MM units. This was well below analyst expectations of 5.35MM units. Econoday has the details:
Better affordability has been underpinning sales as it likely did in August as well. The median price fell $4,500 to $177,700. Distressed sales made up 31 percent of total sales, unchanged from July. The National Association of Realtors (NAR), which compiles the report, is upbeat, noting that August’s results are respectable given strength in July and saying that the sector is “very close” to self-sustaining recovery. The $8,000 first-time buyer credit will end Dec. 1.
The supply side is a big plus in the report, down 10.8 percent in the month to 3.622 million homes now on the market. Supply relative to the pace of sales is at 8.5 months, a 2-1/2 year low and vs. July’s 9.3 months and 10.6 months a year ago.
Tomorrow’s new homes sales report was expected to show a fifth straight gain as was this report, though today’s results may subdue though expectations a bit. Markets are definitely reacting to the report with the S&P down several points and the dollar index up from 76.12 to 76.40. Commodities are moving lower as the play between safety and risk turns back to safety. A final note is that pending home sales, which are on a climb, sent a bad signal for this report which the NAR suspects reflects more stringent or even faulty appraisals that are scuttling sales.
Yesterday we referred to the fact that there were no deeply entrenched data points or catalysts for the bears to grasp hold of. Well, housing, being the crux of most of our problems, could certainly serve as that negative catalyst assuming this is in fact the beginning of a new negative trend in housing data.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.