Special Report-Improvement expected in US housing market
Tuesday, April 20th, 2010Recession is over!
There has been a significant increase in cheerleading about the pace of the US recovery. The Obama administration cites the strength in the equity market and rising March nonfarm payroll growth as confirmation of the recovery, Fed Chairman Bernanke testified before Congress last week that the recovery is gaining momentum and former Fed Chairman Greenspan says that the risk of a double dip recession is near zero. Tuesday, the Fed’s Evan’s said that the recession is definitely over and the risk of a double dip recession is small. The strength and sustainability of the recovery however remains in question because of continued concern about the uncertain outlook for US employment and the housing market. Without sustained improvement in the US labor and housing markets the US recovery will be weak. Focus turns this week’s release of US jobless claims and existing home sales Thursday and new home sales Friday. These reports are key to investor risk sentiment and optimism about the US recovery. Improvement is expected in the US labor and housing market.
Initial jobless claims
Jobless claims for week ending 04/17 will be released on April 22nd and are expected to decline to 460k from 484k. Last week. Initial jobless claims posted an unexpected rise for the last two weeks with claims rising by 24k last week. The rise in jobless claims is disappointing as it interrupts the recent trend of improvement in jobless claims and may be a sign that the recovery in the labor market has stalled. Part of the rise in jobless claims is attributed to seasonal factors including the impact of the Easter holiday. There is hope that once the seasonal factors are adjusted the downtrend in jobless claims will resume. Jobless claims need to fall below 400k to confirm that the US economy is creating more jobs than it is losing. The Labor Department reported last week that 33 states saw decreasing unemployment. Thursday’s jobless claims report is expected to confirm that the rise in jobless claims slowed last week.
Existing home sales
Existing home sales for March will be released on April 22nd and are expected to rise to 528k from 502klast month. Existing home sales have been trending down with sales dropping 16.2% in December, 7.2% in January and 0.6% in February. The decline in existing home sales partly reflects the end of the government’s first- time homebuyer tax credit and generates concern about the sustainability of the recovery in the housing market without government help. The slight decline in February existing home sales encourages speculation that demand for existing home sales is about to re- emerge. There are two reasons that existing home sales will post improvement in March. The first is that demand for existing homes is likely to increase as the weather improves in spring. According to the chief economist at the National Association of Realtors (NAR) Lawrence Yun, February winter storms masked underlying demand for existing homes with some closings postponed because buyers couldn’t get to look at homes in areas impacted by the winter storm. Additionally, March pending home sales rose by 8.2%. Pending home sales tend to lead existing home sales. This suggests that we will see a modest increase of about 3.8% in March existing home sales.
New home sales
New home sales for March will be released on April 23rd and are expected to rise to 330k from 308k last month. Sales of new homes have dropped 27% since last July and sank to near a 50 year low in January. Purchases of new homes declined by 11.2% in January. New home sales fell by 2.2% in February with the inventory of new homes rising to a 9.2 month supply. This marked the highest level of the inventory of new home since last May The one bright spot in the February new home sales report was that the median selling price rose 6.1% to 220,550. The decline in new home sales is a major disappointment because the sale of new homes has not responded to the extension of the government tax credit for first time home buyers. The tax credit for new homebuyers will expire at the end of April which may further reduce demand for new homes. March sales however are expected to rise because of improving weather and seasonal demand. Additionally, March housing starts rose more than expected reported up 1.6%. This was the highest reading for housing starts since November 2008. Improvement in housing starts may reflect growing confidence in the housing market and could be a harbinger of better demand for new home sales. March new home sales are expected to rise by 4%.
Written by Easy-Forex
