Last Week’s Economic News in Review
Aug 2, 2017
Existing home sales declined while new homes sales ticked up, and GDP growth met expectations for the second quarter.
Existing Home Sales
Sales of existing single-family homes, townhomes, condominiums and co-ops, fell 1.8 percent in June to an annual rate of 5.52 million from 5.62 million in May, the National Association of Realtors reported last week. This was slightly below market expectations of a 5.57 million pace, and was the second lowest monthly sales performance for 2017. That said, compared to last year, June’s sales were 0.7 percent higher than June 2016’s sales rate.
Once again, June’s sales activity was a story of narrow supply and high prices, according to NAR’s Chief Economist Lawrence Yun.
“Closings were down in most of the country last month because interested buyers are being tripped up by supply that remains stuck at a meager level and price growth that’s straining their budget,” Yun explained. “The demand for buying a home is as strong as it has been since before the Great Recession. Listings in the affordable price range continue to be scooped up rapidly, but the severe housing shortages inflicting many markets are keeping a large segment of would-be buyers on the sidelines.”
To put numbers behind Yun’s comments, June’s median sales price for existing homes of all types was $263,800, which was 6.5 percent higher than June 2016’s $247,600. June marked the 64th consecutive month of year-over-year price gains. In terms of inventory, the number of existing homes for sale at the end of June fell 0.5 percent to 1.96 million units, representing a 4.3-month supply at June’s sales rate. Compared to last year, this was 7.1 percent below June 2016’s 2.11 million homes.
New Home Sales
Turning to new real estate sales, transactions of new, single-family homes in June hit an annual rate of 610,000, according to last week’s report from the Census Bureau and the Department of Housing and Urban Development. While slightly off from market expectations of a 614,000 annual rate, June’s sales marked a 0.8 gain over May’s rate of 605,000. Compared to last year, this was 9.1 percent higher than June 2016’s pace of 559,000.
Looking at new home prices, the average sales price of new homes sold during June came in at $379,500, and the median sales price was $310,800. In terms of inventory, the number of new homes for sale at the end of June totaled 272,000, which represented a 5.4-month supply at June’s sales pace.
Overall, while new home sales were up, experts cautioned that they had more gains to make before they would return to previous rates.
“When taking into account the size of the U.S., new home sales are still about 30 percent below the 50-year average,” Trulia Chief Economist Ralph McLaughlin told the Associated Press.
Gross Domestic Product
Gross domestic product (GDP) for the second quarter of 2017 grew at an annual rate of 2.6 percent according to last week’s advance estimate from the Bureau of Economic Analysis. This out-performed the first quarter’s GDP gain of 1.2 percent, and was close to market expectations of 2.9 percent.
GDP is an important economic indicator because it represents the value of all the goods and services produced by an economy during a given time period. In the case of the second quarter, GDP growth was driven by growth in personal spending, and businesses investing in inventory, as well as increased spending by the federal government. Negative factors included a drop in residential investments and a decline in exports.
“Consumers continue to drive the economy’s growth, but firmer business investment is also a plus,” Moody’s Analytics Chief Economist Mark Zandi told the Associated Press. “Weaker housing construction was the only significant drag on growth in the quarter.”
This week, we can expect a light calendar of economic reports, due to the holidays:
Tuesday — Car and truck sales for July from the auto manufacturers; construction spending for June from the Census Bureau; personal spending and incomes for June from the Bureau of Economic Analysis.
Thursday — Factory orders for June from the Census Bureau; initial jobless claims for last week from the Employment and Training Administration.
Friday — Unemployment rate, payrolls, average hourly earnings, average workweek for July from the Bureau of Labor Statistics.