The Monday Morning Quarterback / A quick analysis of important economic data released over the past week
Elliot D. Pollack & Co.
The economy should be in a groove now. This would normally be the strongest part of the cycle. The groove this time around, though, is at a low level. This is due primarily to two factors. First is the lack of any meaningful housing recovery. The second is that given what the economy went through over the past few years, consumers are reluctant to use revolving debt (mainly credit card debt). There are very valid reasons for both of these factors. And they are not likely to change quickly. These factors, especially related to housing, are keeping the growth in Arizona at substandard levels as well. At least the state and its major metro area are performing relatively well.
Arizona Snapshot
Statewide and metro Phoenix lodging performance improved in April. Occupancy statewide was 66.8% compared to 62.4% a year ago. In Metro Phoenix, it was 69.6% vs. 65.2% a year ago.
R.L. Brown reported that 1,087 new housing permits were issued in Greater Phoenix in April. This is down 15.7% from a year ago. Year to date, 3,658 permits have been issued compared to 4,459 in 2013. This is an 18.0% decline. This is a very disappointing performance and none of the underlying factors that have caused it appear to be changing in the near term. In Tucson, new permits were 221 in April, up 44.4% from a year ago.
Housing resales are down as well. For April, resales declined 9.7% from a year ago. Year to date, the decline has been 11.3%. Not a pretty picture.
The Greater Phoenix housing opportunity index in the first quarter stood at 68.3 compared to 73.7 a year ago. This is still a better performance than the U.S. as a whole. Greater Tucson stood at 77.9 compared to 84.4 a year ago.
U.S. Snapshot
The index of leading indicators continues to expand. The index now stands at 101.4, up from 101.0 in March and 95.8 a year ago (see chart below). That represents a gain of 5.8% over the last year.
30-year mortgage rates declined to 4.14% for the week ending May 22. That’s down from 4.33% a month ago and 4.20% last week. A year ago, the 30 year rate was 3.59%.
Existing home sales increased for the first time this year in April, while inventory meaningfully increased and home price growth weakened. Total existing home sales rose 1.3% to a seasonally adjusted 4.65 million in April from 4.59 million in March. This is below the 4.99 million pace from a year ago. The median price, at $201,700, was 5.2% above April, 2013.
April new home sales were up an unexpected 6.4% from March. However, they are down 4.2% from a year ago. Keep in mind that March was a weak month. The supply of new homes remains scarce at 5.3 months’ supply. This actually is a negative for sales because the selection is not large.
According to the National Association of Home Builders Opportunity Index, affordability is still very strong. The Index is now at 65.5. That means that 65.5% of homes sold are affordable to families earning the local median income.
