The housing market is seeing a lag in its pending home sales and home appreciation, but with consumer confidence at an almost seven-year high, we can’t be too disappointed.
Consumer confidence: A reason to rejoice
The Consumer Confidence Index is seeing an increase to 90.9, much higher than economists expected and a significant increase from 86.4 in June. This is the third consecutive month for increase and consumer confidence is now at its highest level since October 2007 (95.2).
Growing optimism, particularly in consumers’ outlook for the labor market, establishes the framework for an increase in consumer spending; however, it is important to keep in mind that while consumer confidence is associated with consumer spending, they don’t always move in tandem month to month.
Pending home sales, home appreciation slow
The Pending Home Sales Index from the National Association of Realtors slowed modestly in June after three straight months of solid gains, declining 1.1 percent to 102.7 from 103.8 in May. It was the second-highest mark for 2014, but still well below the 110.8 reading from June 2013.
Home appreciation is also slowing, as the S&P Case-Schiller reading in May shows a seasonally adjusted minus 0.3 percent for Case-Schiller’s 20-city index, from April, but a 9.3 percent increase from May 2013. This is the first month-to-month decline since January 2012.
Softening home prices reflect an underlying weak in the housing market. Hopefully lower prices should give a much-needed boost to sales, as rents are rising at four percent annually. Potential buyers are less likely to flee from shocking price tags and can make better-informed decisions on whether to buy or continue renting.
Jobless claims increased by 23,000 for the week ending July 26. The 302,000 claims are the first week-to-week increase after a month of steady decline, but a 13,000 decrease from June 2014. Claims in July 2013 totaled 333,000.