INDICATOR: November Existing Home Sales and Weekly Jobless Claims
KEY DATA: Existing Home Sales: -4.3%; Year-over-Year: -1.2%/Jobless Claims: 379,000 (up 10,000)
IN A NUTSHELL: "Rising mortgage rates do matter as the surge to buy houses is starting to fade."
WHAT IT MEANS: Rates matter, especially when it comes to the housing market. For a while, the common wisdom was that mortgage rates were so low that even the spring surge wouldn't matter. Well, maybe that view needs to be reviewed. What might have happened during the spring and the summer was a normal surge in home sales as buyers got off the fence and started making offers before rates rose even further. Once that increase was satisfied, we started falling back to more normal levels of home demand. Indeed, the National Association of Realtors reported that for the third consecutive month, existing home purchases dropped. Sales were off in every region and for both single-family homes and condos. Worse, for the first time in nearly 2½ years, the sales pace was lower than it had been the previous year. That happened because demand in the West was way off its November 2012 pace. A drop in distressed property inventories may account for much of the sales weakness. In the rest of the country, demand was still up, though minimally. Prices are holding up, but the annual gains are no longer double-digit. Finally, but maybe critically, the number of homes for sale fell again. A lack of inventory may be another restraint to sales.
Jobless claims jumped again, to a disturbingly high level. However, some states reported claims increases in construction so the issue may be weather not a weakening labor market.