Confidence Falters, Home Resales Climb: U.S. Economic Takeaways

  • Conference Board consumer confidence gauge at seven-month low
  • Sales of previously owned homes second-strongest since 2007

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

CONSUMER CONFIDENCE (FEBRUARY)

  • Slumped to seven-month low of 92.2 (97.2 forecast) from 97.8
  • Led by weakest six-month expectations index, at 78.9, in two years
  • Households’ projected inflation rate over next 12 months was 4.7 percent, the lowest since February 2007
  • Buying plans mixed, with more respondents looking to buy cars and fewer saying they would purchase a house or an appliance

The Takeaway: The survey represents responses received through Feb. 11, the day the Standard & Poor’s 500 Index sank to an almost two-year low, indicating the plunge in equities was one of the main reasons households were more unsettled. Shares have since rallied. While buying plans were mixed, the rule of thumb has always been watch what consumers do, not what they say. In that respect, there was good news at least through January (see section below on sales of existing homes). One concern for Federal Reserve policy makers is the sustained drop in inflation expectations, which could prompt a pullback in spending should Americans decide they want to hold out for lower prices.

EXISTING-HOME SALES (JANUARY)

  • Rose 0.4 percent to 5.47 million rate (5.33 million forecast), second-strongest in almost nine years
  • Median price climbed 8.2 percent from year ago to $213,800
  • Sales of existing one-family homes rose 1 percent, multifamily fell 4.7 percent
  • Inventory dropped from year ago to 1.82 million, representing 4 months’ supply at current sales rate

The Takeaway: The second-fastest pace of sales since February 2007 underscores steady housing demand months ahead of the spring selling season and shows residential real estate will underpin the economy. While inventories typically are leaner in winter months, when home-buying interest wanes, last month’s figure was the second-lowest for any January since 2001. Derek Lindsey, an economist at BNP Paribas, said in an e-mail to clients that a limited number of available properties could deter some potential homebuyers.

S&P/CASE-SHILLER HOME PRICE INDEX (DECEMBER)

  • Rose 5.7 percent in 12 months to December, matching year-over-year gain in November
  • Increases led by Portland, Denver and San Francisco
  • Climbed 0.8 percent (seasonally adjusted) from prior month

The Takeaway: December capped a year of steady home-price appreciation, a good sign for industry momentum in 2016. All 20 cities in the index posted a year-over-year increase, and 13 saw annual prices climb at a faster rate than in November. Such gains should help support household wealth, helping to balance out the damage done from stock-market volatility. Appreciation in residential real estate may help lift the housing-related component of the consumer-price index, which has already provided a sturdy base of support for core inflation.

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