Home Price Indices, Sales and Economic Releases for February

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United States economic data released the past week provided ups and downs for investors across all sectors, including key information for real estate in Q4 2015. The releases started on Tuesday, February 23 with Existing Homes Sales, then New Home Sales on Wednesday, and finished with GDP on Friday. On the whole, investors have reasons to be optimistic based on the existing home sales and GDP numbers.

Existing Home Sales initiated the week’s important economic reports. The U.S. National Home Price Index, which covers all nine U.S. census divisions increased 5.4 percent in December compared to a year earlier where the increase in November was 5.2 percent. Over a non-seasonally adjusted monthly basis, the National Index was up 0.1 percent month-over-month and 0.8 percent when seasonally adjusted, indicating a modest rise.

The metro areas of San Francisco, Portland, and Denver continued their double-digit annual increase of 10.3, 11.4, and 10.2 respectively. Detroit had larger than expected growth at 7.1 percent, increasing from 1.2 percentage points larger than its November readings. The 20-City Composite readings remained unchanged from November prior to adjustment, but rose 0.8 percent when adjusted. However, the 10-City Composite was down 0.1 percent prior to receiving a seasonal adjustment that raised it to 0.7 percent.

New Home Sales came next during the week, tempering enthusiasm from the day’s previous reporting. Unlike the West Coast cities leading the charge with existing home sales, the West reported an overall decline in the national rate of new home sales in January. Sales of newly-constructed homes fell 9.2 percent from December and showed decreases of 5.2 percent below sales in January 2015. As mentioned, the sales in the West nose-dived 32.1 percent month-over-month along with showing a decrease of 24.1 percent year-over-year.

Along with the prior days reporting of existing home sales, the release of the median new home price index notched-in a declined to $278,800 in January. This represents a 4.3 percent decline from the previous year that recorded a new median price of $292,000.  On the other hand, the average (as opposed to median) price increased by $700 to $365,700; evidence that homes at the higher-end have continued an upward climb in pricing.

Further, the reporting estimates a 5.8 months supply at the current rate of sales, which lends support as a seller’s market. For homes on the market, the median number of days before sale was 3.4 months.

On Friday, the week finished with U.S. GDP data. In a surprise to most analysts, the economy grew faster than expected for Q4 of 2015. The real gross domestic product increased 1 percent per the Bureau of Economic Analysis (BEA). Analysts expected the 0.7 percent growth from January reporting to remain, but most economists readied themselves for a downward revision to 0.4 percent. The bureau maintained that real GDP increased 2.4 percent in 2015, remaining consistent with the numbers from 2014.

As economists debate whether the economy at the start of 2016 remains stronger or weaker relative to 2015, all will wait for the BEA to release its third estimate of Q4 and full year GDP on Friday, March 25, 2016. This remains the same week that Existing and New Home Sales data will be released, and the week after the US Federal Reserve Open Market Committee.

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