Pending home sales fell 2.1% in May, far more than economists expected but less of a decrease than last month, according to new data Wednesday from the National Association of Realtors.
National Association of Realtors. “Pending Home Sales Dropped 2.1% in May.”
Economists surveyed by Dow Jones Newswires and Wall Street Journal expected a
-0.4% decrease in pending home sales.2 May’s decline built on a 7.7% slump in April.
“The market is at an interesting point with rising inventory and lower demand,” said NAR Chief Economist Lawrence Yun in a press release. “Supply and demand movements suggest easing home price appreciation in upcoming months. Inevitably, more inventory in a job-creating economy will lead to greater home buying, especially when mortgage rates descend.”
Home prices have been pushed to record highs and existing homes have become more expensive than ones newly built. These price pressures stem from a lack of homes for sale. High mortgage rates have discouraged sellers from putting their houses on the market as many have interest rates lower than the ones currently offered.
Orders for heavy equipment and other durable goods increased for the fourth consecutive month in May.
Durable goods orders moved higher by 0.1%, bucking economist forecasts of a decline of a full percentage point. However, new orders for manufactured durable goods in May came in weaker than revised April results, Census Bureau data showed.
Orders for aircraft, motor vehicles and computer equipment lead the growth in durable goods orders. However, economists said the moderate increase showed the economy could be slowing.
While durable goods orders were higher, BMO Capital Markets Senior Economist Sal Guatieri noted a surge in defense orders helped carry the results, as nondefense capital goods orders, excluding aircraft, fell by 0.6%, the most in four months. Weak primary metals and machinery orders also drug down the results, he said.
“Soft orders for U.S. durable goods in May confirm the economy is getting bogged down under the weight of high interest rates and a strong dollar,” Guatieri said.
-Terry Lane
The final word on the Gross Domestic Product (GDP) in the first quarter is out, and it confirms that U.S. economic growth slowed considerably in the first quarter, but not quite as dramatically as an earlier estimate showed.
The U.S. economy grew at an annual rate of 1.4% in the first quarter, down from 3.4% in the fourth quarter of 2023 the Bureau of Economic Analysis said Thursday. It was the third and final estimate of GDP growth, revising figures that first came out in April. The second estimate, in May, had shown a 1.3% growth rate.
The latest reading on GDP, which measures the country’s entire economic output, incorporated new data showing that the U.S. imported fewer goods and services than previously thought. More imports take away from the country’s economic output.
That outweighed declines in the estimates for several other areas, including consumer spending, the main engine of the economy. The 1.4% rate was in line with the expectations of forecasters, according to a survey of economists by Dow Jones Newswires and the Wall Street Journal.
The GDP reading indicates the economy has slowed as the Federal Reserve’s high interest rates have discouraged borrowing and spending, as intended, to subdue high inflation. The economy is still growing, albeit at a slower pace, meaning that those high rates have yet to cause a recession. That could change if consumer spending continues to drop.
“The cycle that we’re in has been led by consumer spending and if that slows then it could be the beginning of a downturn in economic activity, which would have negative implications for corporate profits and the stock market,” Chris Zaccarelli, chief investment officer for Independent Advisor Alliance in Charlotte, North Carolina, wrote in a commentary.
The number of people making their initial unemployment insurance claim decreased last week to 233,000, falling more than economists expected.
Last week’s initial jobless claims were down 6,000 from the prior week, which was revised higher. The weekly measure is often more volatile and economists look to the four-week moving average as a more stable data point.
Despite the most recent week’s dip, the moving average increased by 3,000 from the prior week.
“Despite the drop, initial claims continue to drift higher on a trend basis, suggesting that, while layoffs remain low for now, demand for workers is easing and more individuals are applying for benefits,” wrote Oxford Economics’ Nancy Vanden Houten. “Any sign that the demand for labor is weakening enough to push up the unemployment rate would add to the case for the Fed to start to lower rates in September.”
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Economic News, home sales
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