The Monday Morning Quarterback: A quick analysis of important economic data released over the last week
U.S. Snapshot
Leading indicators have picked up steam. The Conference Board reported that leading indicators were up 0.6% in July (compared to June) to 96.0 following no change in June and a 0.3% increase in May. The gains were widespread. This would suggest, as most economists have anticipated, that the second half of 2013 will be stronger than the weak first half. The index now stands 3.1% over year earlier levels.
Initial unemployment insurance claims data was disappointing. Initial claims increased by 13,000 last week while expectations were for a slight decline. This is an admittedly volatile series, but, it now stands only 10.2% below year earlier levels. Given where we are in the recover, this is anemic.
The National Association of Realtors reported that existing home sales continued to rise and now stand 17.2% over July 2012. Median prices are up 13.7% over a year ago. As we have discussed before, at this stage of the cycle, this is very good news. It indicates that fewer homeowners are underwater in their homes and that those with equity now have more equity. This will result in more mobility and consumer confidence.
Arizona Snapshot
Even though job growth in Arizona in this cycle has been mediocre relative to what would be normal for the State, recently released jobs data shows that the State has made a significant recovery relative to other states. After being in the top five growth states for years, things changed in this cycle. For example, in 2010, the State was 49th out of 50 states in job growth. Yet, for the first seven months of 2013 compared to the similar 2012 period, the State now ranks 7th out of 50. And for July 2013 vs. July 2012, the State was 4th out of 50.
Arizona Housing
ASU released its monthly report on Greater Phoenix housing. Sales of existing homes were down 7.1% over a year ago largely due to supply constraints and fewer purchases by institutional buyers who generally desire to buy low, rent out the home, and sell high. Those institutional buyers still own only about 5% of homes now rented in the market are and far outnumbered by non-institutional (so called Mom and Pop) investors who own the remaining 95%. Normal (non-distressed) sales were up 51.5% in June 2013 versus a year ago. This is another sign that the market is recovering and the big sale on housing in Greater Phoenix is, for the most part, over. As for prices, all sales were up 21.8% over a year ago with new home prices increasing 25.6%.
R.L. Brown reported that Greater Phoenix new home permits in July were actually down to 1,190 from 1,303 a year ago. So while the 8,009 permits issued for the first seven months of the year are 7.9% over the same 2012 period, it is clear that new housing has slowed. As we have discussed previously, this appears to be a supply constraint as homebuilders struggle to bring on new locations. Unless the growth in jobs and population slow, a low probability event, there will be pressure for more new permits over the next 2-4 years.
Hendricks & Berkadia (Hendricks Partners) reported that through the second quarter of 2013, apartment absorptions exceeded completions by over 2,200 units. Vacancy rates are still in the low 6% range and average rent is up 4.0% from a year ago.
As for Southern Arizona, new home permits have slowed as well and in July stood 25.1% below year earlier levels. Just as in Phoenix, though, year-to-date new home permits were up by 14.6%. Median prices were up 14.3%.
