Today’s tapersaga installment again favours ongoing easing as US housing is now very clearly slowing to a crawl. The NAR last night released Pending Home Sales for October and it was mostly down (chart from ZH):
Although conditions were mixed across the country, pending home sales continued to move lower in October, marking the fifth consecutive monthly decline, according to the National Association of Realtors®.
The Pending Home Sales Index,* a forward-looking indicator based on contract signings, slipped 0.6 percent to 102.1 in October from an upwardly revised 102.7 in September, and is 1.6 percent below October 2012 when it was 103.8. The index is at the lowest level since December 2012 when it was 101.3; the data reflect contracts but not closings.
Lawrence Yun, NAR chief economist, said weaker activity was expected. “The government shutdown in the first half of last month sidelined some potential buyers. In a survey, 17 percent of Realtors® reported delays in October, mostly from waiting for IRS income verification for mortgage approval,” he said.
“We could rebound a bit from this level, but still face the headwinds of limited inventory and falling affordability conditions. Job creation and a slight dialing down from current stringent mortgage underwriting standards going into 2014 can help offset the headwind factors,” Yun said.
…Yun said there are concerns heading into 2014. “New mortgage rules in January could delay the approval process, and another government shutdown would harm both housing and the economy,” he said.
Prices too are now virtually flat month on month for several months. LPS reported September figures of 0.2% growth following the same in August.
If activity does level out and prices don’t fall the Fed might be happy enough with the outcome and could taper. But if so interest rates will rise towards 4.5% and prices will fall.
Advertisement
Security markets weren’t confused by what it meant. As said, stocks hit record highs, the long bond yield dropped more than one percent but rebounded to end a little down. Forex was not so sure with the US dollar up a little and gold was flat. The Australian dollar went sideways.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
