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Economic Week in Review: Home weakness may be temporary

April 25, 2014

While recently released home-sales data have been below expectations, economists are hopeful it's a pause rather than anything permanent. The housing market's recovery has been crucial to the economy's improvement since the recession. Although traction has been lost, the overall trend is still promising. Looking beyond real estate, there were upbeat reports on durable goods and The Conference Board's index of leading indicators.

For the week ended April 25, the S&P 500 Index was down 0.1% to 1,863 (for a year-to-date total return—including price change plus dividends—of about 1.4%.) The yield on the 10-year U.S. Treasury note was down 5 basis points to 2.68% (for a year-to-date decline of 36 basis points).

Leading indicators continue climb

The Conference Board's index of leading indicators, a gauge of the U.S. economic outlook for the next three to six months, rose 0.8%, a bit higher than economists' forecasts. It was the index's third straight increase and tenth increase in the last 12 months. The coincident index, which measures current economic activity, advanced 0.2%, while the lagging index was up 0.6%.

Six of the leading index's ten components were higher, including the financial and labor market indicators. There was a pullback in consumer expectations and in building permits. Manufacturers' orders for consumer goods and materials were unchanged.

"The March increase in the LEI suggests accelerated growth for the remainder of the spring and the summer," said Ken Goldstein, economist at The Conference Board. "The economy is rebounding from widespread inclement weather and the strengthening in the labor market is beginning to have a positive impact on growth. Overall, this is an optimistic report, but the focus will continue to be on whether improvements in the labor market can be sustained, fueling stronger economic performance over the next few months."

Existing-home sales dip further

Sales of previously owned homes slid 0.2% in March to 4.59 million units annualized, slightly below economists' expectations. Compared with a year ago, existing-home sales have declined 7.5%, and sales volume was at its slowest since June 2012. Higher home prices and borrowing costs, rigorous lending conditions, and the severe winter weather have affected the housing market.

While sales fell for the seventh time in eight months, declines in February and March were smaller than those seen in previous months over the year. Sales in March declined in the South and West, and increased in the Northeast and Midwest. Condominium sales slipped 1.8%, while single-family home sales were flat. The median sale price of an existing home in March was $198,500, 7.9% higher than a year ago.

Existing home sales

New-home sales continue to retreat

Sales of new single-family homes slid 14.5% in March to an annualized rate of 384,000, lower than economists' expectations. Sales were 13.3% lower compared to a year ago. While the tough winter was partly to blame for the sluggish market, rising home prices and mortgage rates, stringent lending conditions, and economic uncertainty were also factors, as they were for existing-home sales. The median sale price of a new home was $289,800 in March, and the average sale price was $334,200. It was the first time median prices increased after three straight months of declines.

New-home sales rose in the Northeast, but fell in the South, West, and Midwest. Compared to a year ago, sales were off in all four regions. With sales down, the months of supply on the market increased to 6.0. Despite the data so far this year, economists and builders are hopeful for improvement in the spring and summer as housing-market fundamentals remain intact, with steady job growth and rising consumer confidence.

"Housing data releases have been coming in weaker over the past several months," said Ravi Tolani, economic analyst in Vanguard's Investment Strategy Group. "While somewhat concerning, we believe housing should continue its rebound, perhaps at a slower pace, but the drags on economic growth experienced during the depths of the crisis and the early stages of recovery are not the most likely outcome."

Aircraft lifts durable-goods orders

New orders for durable manufactured goods—products meant to last three years or more—grew 2.6% in March, better than economists expected. It was the second month in a row of increased orders, after two straight months of declines. Similar to last month, the transportation segment increased 4% and was responsible for a good part of the gains as aircraft and automobile orders grew. Defense orders soared 21.6%.

Excluding transportation, orders were up 2%. There were also rises of 1.1% for shipments, 0.6% for unfilled orders, and 0.5% for inventories. Compared to a year ago, March durable goods-orders advanced 3.6%.

The economic week ahead

Wednesday should be an eventful day on the economic calendar as the Federal Open Market Committee's monetary policy statement from the Fed's regularly scheduled two-day meeting is due out. Also due Wednesday is the first estimate for first-quarter gross domestic product and Employment Cost Index figures. In addition, the week brings data on consumer confidence (Tuesday); personal income, construction spending, and the ISM Manufacturing Index (Thursday); and the employment situation and factory orders (Friday).

Summary of major economic reports
Date Report Actual
expected value
10-year note yield S&P 500 Index
April 21 Leading Economic Indicators (March)
Source: The Conference Board
+0.8% +0.7% 0 bp +0.4%
April 22 Existing-Home Sales (March, annualized)
Source: National Association of Realtors
4.59 million 4.60 million 0 bp +0.4%
April 23 New-Home Sales (March, annualized)
Source: Commerce Department
384,000 451,000 –3 bp –0.2%
April 24 Initial Jobless Claims (week ended April 19)
Source: Labor Department
329,000 310,000 0 bp +0.2%
  Durable-Goods Orders (March)
Source: Commerce Department
+2.6% +2.0%
April 25       –2 bp –0.8%
      Weekly change –5 bp –0.1%

bp=basis points. 100 basis points equal 1%. For example, if a bond's yield rises from 5.0% to 5.5%, the increase is 50 basis points.


  • The economic statistics presented in this report are subject to revision by the agencies that issue them. For more information on the reports mentioned in this article, read our Guide to major U.S. economic reports.
  • All investing is subject to risk, including the possible loss of the money you invest.
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