Existing-Home Sales, Third-Quarter GDP: U.S. Economic Takeaways

What Are the Takeaways from Nov. U.S. Home Data?
  • Realtors say plunge in home sales caused by delayed closings
  • Yellen GDP gauge shows consumer, business spending are firm

What you need to know about Tuesday’s U.S. economic data:

PREVIOUSLY OWNED HOME SALES (NOVEMBER)

  • Fell to 4.76 million rate, a 19-month low, from 5.32 million
  • 10.5 percent decrease was biggest since July 2010, when effects of government homebuyer tax credit waned
  • Median price climbed 6.3 percent from year earlier, most since June
  • Inventory tight, with 2.04 million listings, the smallest for any November since 2012 and second-fewest since 2000

The Takeaway: Economists are mostly discounting the November decline because the figure was affected by a change in mortgage processing rules that lengthened the time it took buyers to close on a deal. Lawrence Yun, the chief economist of the National Association of Realtors, called the slump a “statistical anomaly” and said he expects the sales rate to normalize in the coming months once lenders and title companies have had a chance to adjust to the new closing process. Fundamentals such as an improving job market and low borrowing costs should help prop up housing demand going forward, though faster wage growth will be needed to help pull in more first-time buyers, whose ranks remain near historical lows. NAR data show renters are saying a lack of affordability is the main reason keeping them from buying a home.

GROSS DOMESTIC PRODUCT (3Q)

  • Rose at a revised 2 percent annualized rate (median forecast 1.9%)
  • Consumer spending expanded at a 3 percent pace, the same as previously estimated
  • Business investment dropped at a 0.7 percent rate, the weakest reading since the first quarter of 2014, depressed by smaller gains in inventories
  • A swelling trade deficit subtracted 0.3 percentage point from growth as a strong dollar and weak growth abroad restrained exports

The Takeaway: Following a 3.9 percent growth rate in the second quarter, the third and final estimate of third-quarter GDP (until the annual revisions in July) showed growth was depressed by the most volatile components -- inventories and trade. Federal Reserve Chair Janet Yellen has said she’s also looking at final sales to private domestic purchasers (which strip out trade, inventories and government outlays) to get a better sense of underlying demand. That measure, which basically tracks what consumers and companies are spending on American-made goods, climbed at a 3.2 percent rate and has topped GDP in three of the past four quarters.

RICHMOND FED FACTORY INDEX (DECEMBER)

  • Rose to 6 (forecast minus 1) from minus 3 in November. Readings greater than zero signal growth
  • Orders index jumped to 8 from minus 6
  • Employment climbed to 12 from zero

The Takeaway: The index showed manufacturing in the region expanded for the first time since July, while the employment index was the strongest since October 2014. The regional surveys for December so far are showing a mixed picture, with the New York gauge pointing to a smaller contraction while manufacturing in Philadelphia shrank after a brief expansion in November. At least the indexes are no longer all showing conditions are deteriorating further, indicating the worst of the factory slump may be over.

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