Home sales remain tepid

April 22, 2014 06:51 AM

Existing home sales fell 0.2% in March falling from 4.60 million to a 4.59 million unit pace, the lowest level since December.

On a three-month average basis, the pace of sales is 4.60M.

Existing home sales year over year


The decline in March was led by multi-family sales, down 1.8%. Single family sales were flat in March. Year over year, existing home sales are down 7.5%. From a supply standpoint, with demand noticeably waning, months’ supply rose from 5.0 to 5.2 in March, an 11-month high.

Months’ supply

The median price of an existing home rose from $188k to $199k in March, up nearly 8% over the past 12 months. (Separately this morning, the FHFA reported a 0.6% increase in February home prices.)

From a regional standpoint, sales were weak in the South and West, down 3.0% and 3.7%, respectively. Sales in the Midwest and North, on the other hand, were up 4.7% and 9.1%, respectively.

Bottom line: Demand for housing remains uneven after months of heightened sales activity earlier in 2013. Now against the backdrop of minimal income growth and a still-tepid labor market, demand continues to wane. For potential home buyers, rising prices are eroding affordability, putting further downward pressure on consumer’s ability and willingness to finance a home purchase. From the owner’s perspective however, rising prices are helping to create and maintain a wealth effect, fueling (or at least helping to support) consumer spending.

Also this morning, the business activity index for the mid-Atlantic region, the Richmond Fed, rose from   -7 to 7 in April.

Richmond Fed Manufacturing Index

In the details, shipments rose from -9 to 6 at the start of the second quarter, new orders improved from -9 to 10 and capacity utilization gained from -14 to 1. Employment also improved in April, rising from 0 to 4, a three-month high. The workweek, however, was unchanged at a reading of 2.

Bottom line: A welcomed step in the right direction suggesting manufacturing activity in the Carolinas, DC, Maryland, and the Virginias is beginning to pick up after months of back-to-back contractions in February and March. But while a welcomed improvement, the increase in April is hardly a return to the activity levels seen at the end of 2013-start of 2014 when the headline index averaged a reading of 13.

Yesterday the Chicago Activity Index fell from a revised 0.53 to 0.20 in March, in line with expectations.

Chicago Fed Activity Index

The Chicago Fed Index draws on 85 economic indicators with a reading below zero an indication of below-trend growth and easing inflation pressures.

This is the second consecutive positive reading after falling to -0.74 in January. On a three-month average basis, the index is flat, a slight improvement from a -0.09 trend at the end of Q1 2013.


About the Author

Lindsey is the Chief Economist for Sterne Agee, specializing in the research and analysis of economic trends and activity, world economies, financial markets and fiscal policies. In addition to more than 10 years of experience, Piegza has published several academic papers in journals such as Harvard Business Review as well as in textbooks published by the Kellogg Graduate School of Management. Often quoted in the business press, Piegza is a regular guest on CNBC and Fox Business as well as national radio and other business news outlets.