Pollack Quarterback: The good news continues for real estate; enjoy it

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The Monday Morning Quarterback: A quick analysis of important economic data released over the last week

By Elliott D. Pollack and Company

The good news continues.  The CPI (even before food and energy prices) is below the Fed target and consumer confidence is strong.  Despite this, retail sales were weaker than expected.  That simply doesn’t fit.  It is also possible that more consumer spending is going to services which isn’t included in the retail sales report.  Other than that, everything else fits the picture of a healthy economy that would be in the boom portion of the cycle were it not for weakness in the construction (mainly housing) sector.  That weakness will turn into strength only slowly.  Enjoy what is going on.  It is likely to be as good as it gets for the foreseeable future.

Arizona Snapshot:

  • The year’s strong passenger traffic continued in November at Phoenix Sky Harbor International Airport. November traffic was up 6.1% from a year ago. The 2014 improvement was driven by strong travel demand, the addition of new flights and holiday passenger traffic. However, the Sunday after Thanksgiving (traditionally the business travel day of the year) had less traffic this year compared with November 2013.
  • Single family listings in the Greater Phoenix multiple listing service were about flat compared to a year ago in December. Median prices over the same period were up 12%.
  • In southern Arizona, permits in 2014 were 2,284 compared to 2,250 in 2013.
  • According to Real Data, apartment vacancy rates stood at 7.5% in the 4th quarter of 2014. A year ago, vacancy rates were 7.9%.  Average rents in the 4th quarter were $791 compared to $753 a year ago.

U.S. Snapshot:

  • The consumer price index declined for the second month in a row due to lower energy prices. Overall, consumer price inflation fell another 0.4% in December after falling 0.3% in November.   The CPI now stands 0.7% above a year ago.  Core inflation (all items less food and energy) is up 1.6% over a year ago.
  • The University of Michigan’s consumer sentiment index for January stood at 98.2 which is its highest level in 11 years. The index was 20.9% above a year ago and 4.9% over December.
  • Retail sales were disappointing in December. Retail sales in December fell 0.9% after posting a 0.4% gain in November.  Expectations were for a 0.1% decline.
  • The manufacturing and trade inventories/sales ratio in November stood at 1.31. The same level as October and up only slightly from 1.28 a year ago.
  • Industrial production declined 0.1% in December mainly due to declines in utilities. Industrial production now stands 4.9% above a year ago.
  • Capacity utilization in December declined 0.4% and now stands at 79.7. This is slightly below levels that have historically been associated with increases in spending for plant.
  • For the week of January 15, 30-year fixed rate mortgages stood at 3.66%, down slightly from 3.73% a week earlier and 3.80% a year ago.
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