Markets Digest Cornucopia of Data

There was a full plate of inflation, housing and economic data ahead of the Thanksgiving holiday. Read on for these top headlines:

·      Progress Stalls on Inflation

·      Hurricanes, Higher Rates Hurt New Home Sales

·      Pending Home Sales Beat Estimates

·      Home Price Gains Continue

·      Third Quarter GDP Holds Steady at 2.8%

·      Continuing Unemployment Claims Continue to Rise

Progress Stalls on Inflation

October’s Personal Consumption Expenditures (PCE) showed that headline inflation rose 0.2% from September, while the year-over-year reading rose from 2.1% to 2.3%. Core PCE, the Fed’s preferred measure which strips out volatile food and energy prices, rose 0.3% monthly. The year-over-year reading increased from 2.7% to 2.8%, remaining near the lowest level in over three years.

What’s the bottom line? While annual inflation did move higher in the wrong direction, the increase is partly due to a lower figure from October 2023, which was removed from the rolling 12-month calculation and replaced with October 2024’s 0.3% reading. Looking ahead, readings for January through April 2024 are higher comparisons, meaning progress lower toward the Fed’s 2% target may be easier next year when those figures are replaced.

Hurricanes, Higher Rates Hurt New Home Sales

New Home Sales, which measure signed contracts on new homes, plunged 17.3% from September to October, with the 610,000-unit pace reaching the lowest level since November 2022. Signed contracts were also 9.4% lower than they were in October of last year.

Regarding inventory, there were 481,000 new homes for sale at the end of October, which was up slightly from 471,000 in September. However, only 113,000 were completed, with the rest either under construction or not even started yet, so more available supply is still needed.

What’s the bottom line? Almost the entire decline in October’s signed contracts came in the South, which was severely impacted by Hurricanes Helene and Milton during this time. In addition, rates moved higher in October while some buyers also mentioned they were staying on the sidelines until after the election. These factors combined all contributed to October’s decrease in activity for new construction homes.

Pending Home Sales Beat Estimates

Pending Home Sales, which are signed contracts on existing homes, rose 2% from September to October per the National Association of REALTORS® (NAR). This marked the third consecutive monthly rise as sales were also 5.4% higher than they were a year earlier.

What’s the bottom line? Contract signings rose across all regions of the country in October as NAR’s Chief Economist Lawrence Yun, noted that “homebuying momentum is building after nearly two years of suppressed home sales.” Yun added that, “Even with mortgage rates modestly rising despite the Federal Reserve's decision to cut the short-term interbank lending rate in September, continuous job additions and more housing inventory are bringing more consumers to the market.”

Home Price Gains Continue

Home prices nationwide rose 0.3% from August to September after seasonal adjustment per Case-Shiller’s Home Price Index, helping home values reach an all-time high for the sixteenth straight month. Home values in September were also 3.9% higher than a year earlier, following a 4.3% gain in August. Case-Shiller’s index is considered the gold standard in tracking changes in residential real estate values.

The Federal Housing Finance Agency’s (FHFA) House Price Index also showed that home prices rose a seasonally adjusted 0.7% from August to September, and they were 4.4% higher when compared to the same time last year. Note that FHFA’s Index does not include cash buyers or jumbo loans, only loans financed with conforming mortgages, which accounts for some of the differences in the reports.

What’s the bottom line? While home prices are continuing to appreciate, the pace is slower than earlier in the year. However, homeownership continues to provide a significant wealth creation opportunity. And if mortgage rates come back down, this could drive demand and potentially re-accelerate home price gains, given that supply also remains low on a historic basis.

Third Quarter GDP Holds Steady at 2.8%

The U.S. economy grew by 2.8% in the third quarter per the Bureau of Economic Analysis’ second estimate for that time period, matching their first estimate reported in October. By comparison, we saw 3% and 1.6% growth in the second and first quarters of this year.

What’s the bottom line? Economic activity in the third quarter was driven by consumer spending, exports, federal government spending and business investment. Note that this data is subject to revision when the final reading is released on December 19.

Continuing Unemployment Claims Continue to Rise

Initial Jobless Claims inched down another 2,000 in the latest week to a 7-month low, with 213,000 people filing for unemployment benefits for the first time. However, Continuing Claims rose by 9,000 as 1.907 million people are still receiving benefits after filing their initial claim.

What’s the bottom line? While the low level of Initial Claims shows that businesses still aren’t cutting many jobs, the rising number of people remaining on benefits suggests that jobs have become harder to find for people who are unemployed. This elevated trend in Continuing Claims has been persistent, as they have topped 1.8 million since the start of June (25 consecutive weeks).