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Pollack: The economy is expanding

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The Source for Information and Analysis on the Arizona Economy and Real Estate
EDP LogoELLIOTT D. POLLACK

& Company

FOR IMMEDIATE RELEASE
February 27th, 2017
 
The Monday Morning Quarterback
A quick analysis of important economic data released over the past week
Not a lot of economic news last week. But, the data that were released was positive. Consumer sentiment remains high.  Housing sales, both new and existing, continue to improve.  Housing prices continue to show a moderate level of increase.  And lodging demand, an indicator of how tourism is doing, continues to grow as expected.  Overall, the picture is one of an economy that continues to expand.
Given the amount of economic stimulus that the economy is anticipated to receive in the form of tax cuts and infrastructure spending, late 2017 and 2018 should see an acceleration in employment and growth.  At some point soon thereafter, the issue will be labor.  If some of those who left the labor force (as measured by the labor force participation rate) return to what will be a tight labor market and/or the new administration understands the issue and rearranges its priorities so as to let in certain skilled foreign labor (construction workers and high tech employees), it will be easier for the stimulus to maintain a higher growth rate. Time will tell.
But, we are getting ahead of ourselves.  For the near term, the outlook remains quite positive.
U.S. Snapshot:
  • The University of Michigan consumer sentiment index, while modestly off its post-election peak of 98.5 in January, is still very strong at 96.3 in February.  A year ago, the index stood at 91.7.
  • 30-year fixed rate mortgages were about flat for the week of February 23rd at 4.16%.  Rates have been flat since the increases that occurred late in 2016.  A year ago, 30-year mortgage rates were in the 3.7% range.  Given the FED’s indications that it plans to increase interest rates, combined with stronger demand, suggest that mortgage rates are likely to increase over the rest of 2017.
  • Existing home sales were off to a fast start in early 2017.  Total existing home sales, which are completed transactions that include single family homes, townhomes, condos and co-ops, expanded 3.3% to a seasonally adjusted annual rate of 5.69 million in January from 5.51 million in December.  This is the strongest level of activity since February 2007.
  • Sales of new single family homes in January were at a seasonally adjusted annual rate of 555,000.  This compares to 535,000 in December and 526,000 a year ago.  This is a strong 5.5% gain over a year ago.
Arizona Snapshot:
  • The occupancy rate for the state’s lodging industry increased in January to  62.4%.  This is up from 61.6% a year ago and 54.9% in December.  Demand is up 2.4% over a year ago and supply was up 1.1% for the same time period.
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