U.S. New-Home Sales Rose 2% in February Sales of newly built homes are rising amid steady job growth and a scarcity of older homes on the market, another sign the U.S. economic expansion remains stable despite troubles abroad.
New-home sales grew 2% in February from a month earlier, hitting an annual pace of 512,000, the Commerce Department said Wednesday. That put the industry on track to eclipse the 501,000 homes sold throughout 2015, the best year since 2007.
Sales were down nearly 4% in the first two months of this year compared with the same period in 2015. But over the past 12 months, they have risen compared with the prior year. (…)
The median price of a new home—the point at which half of homes were sold above and half sold below—stood at $301,400 last month. That was up 2.6% from a year earlier. Price figures aren’t adjusted for seasonal factors.
New-home sales fell sharply in the Northeast and Midwest last month, declined modestly in the South, and climbed sharply in the West.
Decidedly, the WSJ is in a good mood these days. As long as I look as these 2 Haver Analytics charts, I fail to see much positive momentum in sales. Also noting that the inventory of unsold homes increased 17.6% YoY in February, I can only hope that this was weather-induced…
Interesting chart from CalculatedRisk.
On inventory, according to the Census Bureau:
“A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted.”
Builders are building. Let’s hope they sell…
Inflation stirs as Fed stands still Bank’s dovish tone opens debate on whether the US may overshoot 2 per cent target
(…) Ms Yellen downplayed the significance of recent movements in core inflation, which excludes energy and food and has risen to 1.7 per cent. The Fed forecasts predict overall price growth to end this year at 1.6 per cent, inch up to 1.8 per cent in 2017 and only reach its target of 2 per cent in 2018.
Ms Yellen’s tone contrasts not only with research by some Wall Street analysts but also with figures such as John Williams, a close ally who heads the San Francisco Fed and signalled this month he was encouraged by the rise in underlying inflation, adding that the economy was set to “power aheadâ€.
Mr Williams and Dennis Lockhart of the Atlanta Fed, who like Mr Harker are not voting on rates this year, have also said an April move should be considered, while Esther George of the Kansas City Fed voted for an increase in March.
This month Stanley Fischer, the Fed’s vice-chair, said he saw the “first stirrings†of inflation. (…)
But Ms Yellen suggested the upward move in core inflation could be down to volatility rather than a trend. Part of the rise is likely to have been due to prices that are calculated rather than measured directly, such as in the healthcare and financial services sectors, and central bankers are reluctant to give them too much significance.
The increase was also influenced by rises in typically volatile prices for goods such as clothing, pharmaceutical goods and jewellery — which lurched up by more than 5 per cent from January to February alone in the CPI. (…)
In recent days there have been signs of higher price expectations in market-derived measures. The New York Fed’s survey of consumer price expectations has also shown an uptick.
Nevertheless, it would be perilous for the central bank to be raising interest rates at a time when expectations are near historic lows. Ms Yellen stressed the importance of expectations, saying their stability “cannot be taken for grantedâ€.
Ethan Harris, an economist at Bank of America Merrill Lynch, counters that there is now broad-based evidence for a pick-up not only in inflation but wage growth. “The FOMC is more willing to allow inflation to overshoot the 2 per cent target than they are suggesting,†he said.
A Strange Signal from the Markets: Stagflation?
The concern comes from a closely watched part of the bond market from which inflation expectations are derived. This year’s market rebound was accompanied by a sharp rise in these inflation expectations, which moved from a February low of 1.2% a year for the next decade to 1.7%, the highest since the fright over China last summer.
Unfortunately, this rise in what is known as the 10-year inflation “break-evenâ€â€”the difference between ordinary Treasury bond yields and inflation-linked yields—was not all good news.
Treasury yields reversed at the same time as inflation expectations turned in mid-February, but inflation-linked yields have continued to fall. (…)
One interpretation: the market is worried that growth will remain so-so while rising oil prices and incipient wage pressure force the U.S. Federal Reserve to tighten policy. Not exactly the stagflation of the 1970s, which ended in 1980 with inflation hitting 15% amid a recession. But a sort of stagflation-lite: weak growth and accelerating price rises. (…)
Good timing:
Philadelphia Fed Introduces New Measure of Inflation Expectations
The Federal Reserve Bank of Philadelphia’s Real-Time Data Research Center today launched the Aruoba Term Structure of Inflation Expectations (ATSIX), a smooth, continuous curve of inflation expectations three to 120 months ahead.
“We think the ATSIX will be useful to policymakers, researchers, and business analysts for studying how inflation expectations and real interest rates evolve and respond to monetary policy,†said Fatima Mboup, a senior research assistant in the Real-Time Data Research Center.
Inflation expectations are commonly gauged in two ways — from expected inflation rates implied in market interest rates and from surveys of economists or consumers. Measures of expected inflation based on surveys of economists have been found to be generally superior to market-based measures. However, because surveys ask respondents to forecast inflation rates for noncontiguous time horizons, the resulting data points are widely spaced. The ATSIX resolves these complications by creating a smooth curve of inflation expectations using a statistically optimal method to combine survey-based measures: the Philadelphia Fed’s Survey of Professional Forecasters, and the Blue Chip Economic Indicators and Blue Chip Financial Forecasts published by Wolters Kluwer Law & Business.
The ATSIX will be updated around the 20th of each month after the source data are released.
SENTIMENT WATCH
Earnings season looms over Wall Street Profits look unlikely to rebound and could hit sentiment
Chinese Earnings Estimates Cut Most Among Major Asian Markets
Projections for earnings of companies in the Shanghai Composite Index in the next 12 months were lowered by 6.8 percent, while those for firms in Hong Kong’s Hang Seng China Enterprises Index, or the H-share gauge, were reduced by 6.2 percent, according to data compiled by Bloomberg. (…)
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Beijing Quietly Signals Growing Market Confidence Short selling and margin trading, both officially discouraged in China’s stock markets since last summer’s crash, are getting a tacit nod from Beijing in what is widely seen as a signal of authorities’ growing confidence in a recovery.
A Bull Market, A Bear Market, Or A Bunny Market? by James W. Paulsen, Ph.D. – Wells Capital Management
Most investors wonder if the recent rally in stocks marks a resumption of the bull market or whether it simply represents another temporary respite from an unfolding bear market. However, perhaps the rest of this economic recovery will be characterized not by a bull nor by a bear, but rather by a bunny! Unlike an enthusiastic bull or a scary bear, a bunny market hops about a bit but really does not go anywhere and bunnies have often dominated the stock market during the latter stages of past economic recoveries. (…)
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Retail sales rose sharply this month [March], driving the index to 36 from February’s reading of 18. Big ticket sales also strengthened, bringing the index to 18 from 11. Shopper traffic was heavier; the indicator added three points to end at 35.
But, as shown in this chart, courtesy of Yardeni Research, Inc. nearly 60% of stocks in the S&P 500 have topped their 200-day moving averages as of the end of last week. That compares with 20% in mid-January.
That said, skeptics will still find reason to doubt the sustainability of the rally. Yardeni notes that for the 200-day average, “the good news for the bearish technicians is that most of those averages are still in downtrends.” 
