Existing home sales bear watching


& Company

March 28th, 2016
The Monday Morning Quarterback
A quick analysis of important economic data released over the last week
Last week’s data suggests the national economy continues to trudge along in the face of continuing head winds.  Fourth quarter real GDP grew at a modest 2.0%.  For the year as a whole, 2015 real GDP was up 2.4%, the same rate as in 2014.  Corporate profits were under pressure.  Existing home sales took a step back in February and new home sales were weaker than expected.  And most disturbingly, manufacturers’ new orders were down.
On the other hand, Arizona employment stats were positive and the unemployment rate declined.  So, the state, mainly because of stronger jobs growth in Greater Phoenix, is improving.
U.S. Snapshot:
  • Corporate profits declined by 11.5% from a year ago in the 4th quarter.  For the year as a whole, they were down 3.1% in 2015.  Corporate cash flows were down 10.0%from a year earlier in the 4th quarter and were down 2.6% for 2015 (see chart below).
  • Manufacturers’ new orders for durable goods were down 2.8% from January.   This is an indication that companies are not spending as much on increasing or replacing capacity. If this continues, it does not bode well for employment.  Non-defense goods, excluding the volatile aircraft sector, were down 0.1% from a year ago and 1.8% from January.
  • After increasing to the highest annual rate in six months, existing home sales tumbled in February amidst low supply levels and continued price growth.   Thus, part of the problem appears to be a lack of supply in the affordable price range.  This bears watching.
Arizona Snapshot:
  • The state’s seasonally adjusted unemployment rate dropped one tenth of one percent to 5.5% in February.  A year ago, the state’s unemployment rate was 6.3%.  The U.S. rate is 4.9%.  The Greater Phoenix unemployment rate fell to 4.6% and Greater Tucson’s was 4.8%.
  • Arizona has finally recovered all the jobs lost in the Great Recession.  Between late 2007 and late 2010, the state lost 313,700 jobs.  It has now regained 316,000.  Greater Phoenix regained all the lost jobs a year ago and has been expanding since.  Greater Tucson has regained only 73% of the 36,900 jobs it lost.
  • While year over year comparisons for Greater Phoenix and Greater Tucson are subject to revision, it appears that for the first two months of the year, Greater Phoenix is up 3.6% in jobs and Greater Tucson is up 2.6%.
  • Greater Phoenix population grew by 87,988 between July 1, 2014 and July 1, 2015.  This makes Greater Phoenix the 4th fastest growing metro area in the country in absolute terms.  While net migration has picked up in Greater Phoenix, there are still seven counties that are suffering net out migration.
  • Statewide lodging performance continues to improve.  As of February, occupancy was 74.2% compared to 73.7% a year ago.
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