The Monday Morning Quarterback | A quick analysis of important economic data released over the past week
Arizona Snapshot:
The rate of decline in monthly unemployment claims has flattened out over the past few months. Initial claims are now only 7.3% below a year ago. The rate of decline up until recently had been running in the double digits. This suggests only modest improvement in the unemployment rate.
Arizona retail sales were up a strong 16.9% in December over a year ago. The lion’s share of the gains was in autos and light trucks. Maricopa County retail sales for December 2013 were up 21.9% over December 2012.
Lodging performance for both the state as a whole and for Metro Phoenix continued to show improvement. Occupancy for the state in January was 57.1% compared to 54.5% a year ago. In Metro Phoenix, occupancy was 63.9% compared to 61.3% a year ago. The gains were due to stronger demand as supply was essentially flat.
The most often asked question over the past few weeks is about the local housing market. R.L. Brown’s data indicates that the number of new home permits in Greater Phoenix was down 26.8% in January compared to a year ago. In Greater Tucson, the decline was 18.5%. What happened?
Was it an even lower rate of population growth? Was it the change in the maximum level of an FHA loan? Was it that the uncertainty over Dodd-Frank has caused private lenders to avoid the mortgage market?
Was it the change in affordability from a year ago? Was it the weather back east? Was it the retrenchment of investors in the single-family market? Was it simply an aberration?
Anecdotal evidence suggests that traffic was up, but conversion of traffic to sales was slow. Some builders also express concern over the effects of the lower loan limit and the unintended consequences of Dodd-Frank. The level of job creation seems to indicate that population growth should continue at a modest level.
The fact is that no one knows for sure at this point. But, the answer will become clearer over the next couple of months. We will follow this closely.
U.S. Snapshot:
Leading indicators continue to rise despite temporary weather effects. They were up 0.3% in January compared to December and were up 5.7% over a year ago. This is a good performance (see chart below).
Consumer prices grew by a modest 0.1% in January and now stand only 1.6% over a year ago. This is slightly below the Fed’s 2.0% target rate.
Initial claims for unemployment insurance are down 6.4% (4-week moving average) from a year ago. This signals that the unemployment rate is likely to continue its slow decline.
30 year mortgage rates continued to be steady last week at 4.33%.
New single family starts were down 6.7% from a year ago in January. This decline is largely due to the extreme cold of January. Single family permits were actually up 2.4% over a year ago in January.
Slightly lower median home prices and a slight uptick in mortgage rates contributed to housing affordability holding steady in the fourth quarter. In all, 64.7% of new and existing homes sold in the quarter were affordable to families earning the U.S. median income of $64,400. This is virtually the same as the third quarter (64.5%) but down from 74.9% a year ago.
