Home    Permits, Sales, and Home Prices are Up!
The Monday Morning Quarterback 
A quick analysis of important economic data released over the last week
 
The U.S. economy continues to plug along, with positive signs from unemployment insurance claims and industrial production. Nationally, homebuilders are not as happy as they were a month ago, but still optimistic about 2016. Locally, homebuilding continues to recover and posted an impressive 57.3% gain in permits over last year. There is still a lot of recovery left for the single family market in Arizona and the diminishing supply of lots and difficulty in finding skilled labor will present challenges, but continually increasing demand will cure those ills over time.
U.S. Snapshot:
  • Initial claims for unemployment insurance began falling once again, a positive sign for the employment outlook. Claims for the second week in February represent a 2.6% decline from a week ago and an 8.1% decline from last year.
  • Leading indicators declined 0.2% in January following a 0.3% decrease in December and a 0.5% increase in November.  The drop was led by declines in stock prices as well as unemployment insurance claims that were on the rise last month.  Consecutive month declines do NOT signal a significant increase for the risk of recession. Rather, the 6-month growth rate suggests continued moderate growth in the near term.
  • The consumer price index (CPI-U) was unchanged in January on a seasonally adjusted basis and now stands 1.3% higher than a year ago.  The base rate of inflation (all items less food and energy), was up 2.2% over the last 12 months.
  • The Producer Price Index for final demand goods decreased 0.7% in January, the second consecutive decrease. The decrease was caused by falling energy prices, while food prices actually increased 1%.
  • Industrial production increased in January by 0.9% compared to the month prior after a decline of 0.7% in December.  Utilities jumped as demand for heating increased and manufacturing increased 0.5% over the month (1.2% above last year), while mining remained unchanged.  Production now stands 0.7% below a year ago.
  • Capacity utilization increased in January to 77.1% and now stands 2.0% below a year ago and 2.9% below its long-run (1972-2015) average.  The current level is below the level that historically been associated with significant increases in business plant and equipment spending (see chart below).
  • Privately owned housing units authorized by building permits, while down 0.2% from December, were up 13.5% over a year ago.  For the month, single family permits were down 1.6%.
  • Builder confidence fell 3 points in February to 58 according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This is mainly due to the high cost and low availability of labor and land (finished lots). Builders still remain optimistic in terms of sales trends.
  • Modest home prices and declines in the mortgage interest rate allowed 63.3% of new and existing homes sold between the beginning of October and end of December to be affordable to families earning the U.S. median income of $65,800. This up from the 62.2% of homes sold that were affordable to median-income earners in the third quarter.
  • The national median home price fell from $231,000 in the third quarter to $226,000 in the fourth quarter. Meanwhile, average mortgage rates edged lower from 4.18 percent to 4.09 percent in the same period.
Arizona Snapshot:
  • Arizona’s unemployment claims are still lower than last year (-6.7%).
  • Single family sales in Greater Phoenix are down in January from the month prior, though they are 9.2% higher than one year ago. Median prices are still on the rise and are now 9.1% above a year ago. The median single family home price in January was $227,900.  Months’ supply of homes is now 5.0 (see below chart).
  • According to R. L. Brown, new home permits in January numbered 1,257.  This is a 57.3% gain from the same month in 2015.  Pinal County’s permit figures more than doubled from last January.  New home closings are also 18.9% higher than a year ago.
  • In Southern Arizona, new home permits are 12.6% higher than a year ago at 143 permits. New home closings are up slightly from a year ago, while resale activity is up 26.3% from last year. Median resale prices are up by 4.4% while new home prices show a decline of 8.3% in January.
 

 
About EDPCo
Elliott D. Pollack & Company (EDPCo) offers a broad range of economic and real estate consulting services backed by one of the most comprehensive databases found in the nation. This information makes it possible for the firm to conduct economic forecasting, develop economic impact studies and prepare demographic analyses and forecasts. Econometric modeling and economic development analysis and planning are also part of our capabilities. EDPCo staff includes professionals with backgrounds in economics, urban planning, financial analysis, real estate development and government. These professionals serve a broad client base of both public and private sector entities that range from school districts and utility companies to law firms and real estate developers.  
For more information, contact –
Elliott D. Pollack & company
 

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