Original Post Date: September 23, 2010
By: Darrell A. Hughes and Jeff Bater
Sales of previously owned U.S. homes rose 7.6% in August, bouncing off a record low as the housing sector fights to recover without government support.
Separately, the number of U.S. workers filing new claims for jobless benefits rose by more than economists expected last week in yet another reminder of continued weakness in the labor market.
Existing-home sales increased to an annual rate of 4.13 million, the National Association of Realtors said Thursday.
Inventories of used homes decreased by 0.6% at the end of August to 3.98 million available for sale. That represented an 11.6-month supply at the current sales pace, compared with a 12.5-month supply in July.
Economists surveyed by Dow Jones Newswires had expected existing home sales to climb by 7.0% to an annual rate of 4.10 million.
The median price for an existing home was $178,600 in August, up 0.8% from August 2009.
The report was the second this week giving a sign of stability for the beaten-down housing sector. The Commerce Department said housing starts in August rose a better-than-expected 10.5%. Still, the gain in starts was driven partly by apartment construction, a sign demand for housing could be shifting from purchases of houses to apartment rentals. Analysts say recovery of the housing sector will take a long time.
“The housing market is trying to recover on its own power without the home buyer tax credit,” NAR chief economist Lawrence Yun said.
The U.S. housing market plunged after the end of a government tax credit for first-time buyers. The subsidy supported a troubled sector trying to recover along with the overall economy from the longest recession since the Great Depression.
The tax credits offered certain buyers up to $8,000 to sign a contract by April 30. Deals originally needed to close by June 30, but lawmakers pushed that deadline to Sept. 30.
Still, sales of existing homes fell in May, June, and July. Mortgage rates are low but unemployment is high, scaring off would-be buyers.
Despite attractive home prices, Yun expect soft sales in September and October. The housing recovery “will likely be slow and gradual because of lingering economic uncertainty,” Yun said.
The realtors adjusted their existing home sales figures for July upward, saying sales rose to a 3.84 million annual rate. Originally, the NAR estimated a sales rate for July of 3.83 million, the lowest on record. Records go back to 1999.
Year over year, existing home sales were down 19.0% from an annual rate of 5.10 million in August 2009.
In August, existing home sales increased across all regions. Sales in the West posted the largest gain, rising 13.8%. Northeast
Sales were up by 7.9% in the Northeast, 5.2% in the South, and 5.0% in the Midwest.
Jobless Claims Increase
Initial unemployment claims increased by 12,000 to 465,000 in the week ended Sept. 18, the Labor Department said in its weekly report Thursday. New claims for the previous week, ended Sept. 11, were revised upward to 453,000 from 450,000. Economists surveyed by Dow Jones Newswires had expected new claims would rise by only 3,000. But in a more positive sign, the four-week moving average, which aims to smooth volatility in the data, fell by 3,250 to 463,250.
This latest rise in jobless claims comes as Federal Reserve officials weigh taking further actions to help stimulate the economy amid concern about low levels of inflation and continued high joblessness. In a statement earlier this week, the Federal Open Market Committee said that household spending remains constrained due to “high unemployment, modest income growth, lower housing wealth and tight credit.” The FOMC members added that they were “prepared to provide additional accommodation if needed to support the economic recovery.”
A Labor Department economist Thursday said a rise in claims is generally expected in the reporting week after a federal holiday, but this year the filings went up by a little more than anticipated.
In the Labor Department’s claims report Thursday, the number of continuing claims — those drawn by workers for more than one week in the week ended Sept. 11 — fell by 48,000 to 4,489,000 from the preceding week’s revised level of 4,537,000. Continuing claims are reported with a one-week lag.
The unemployment rate for workers with unemployment insurance for the week ended Sept. 11 was 3.5%, a 0.1 percentage point decrease from the prior week’s revised rate of 3.6%.
The report’s state-by-state breakdown of new claims for the week ended Sept. 11 shows that the largest increase in claims took place in Florida, which saw a rise of 2,755 claims due to layoffs in the construction, service, manufacturing and agricultural industries.
California had the largest decrease in claims with a fall of 10,754 due to a shorter work week and fewer layoffs in the service industry.
A Labor Department economist said Thursday that the latest claims figures contain estimates for Nebraska.
Leading Indicators Rise
The index of leading economic indicators rose more than expected in August. However, the pace suggests a weak but continuing recovery going forward.
The leading index increased 0.3% last month, after rising an unrevised 0.1% in July, the Conference Board said Thursday.
Economists surveyed by Dow Jones Newswires had expected a gain of 0.2% in the August index.
“While the recession officially ended in June 2009, the recent pace of growth has been disappointingly slow, fueling concerns that the economic recovery could fade and the U.S. could slide back into recession,” says Ken Goldstein, economist at the board. “However, the latest data from the U.S. LEI suggest little change in economic conditions over the next few months. Expect more of the same–a weak economy with little forward momentum through 2010 and early 2011.”
Thursday’s leading index report was released a short while after government data showed new jobless claims unexpectedly jumped 12,000 to 465,000 in the Sept. 18 week.
In August, seven of the 10 leading indicators increased. The most positive indicators were the interest rate spread and the real money supply.
The coincident index was unchanged in August after rising a revised 0.1% that was first reported as 0.2%.
The lagging index rose 0.2% last month after rising an unrevised 0.4%.