Economy Watch: New Home Sales Jump in October; Beige Book: Moderate & Modest Growth, Again; ADP: Strong Employment Gains
New home sales spiked by 25.4 percent month over month in October. Economic growth was described as moderate and modest in the latest Federal Reserve Beige Book. And according to ADP, the private sector created a relatively strong 215,000 jobs.
By Dees Stribling, Contributing Editor
The Census Bureau reported a spike in new home sales on Wednesday, with sales at an annualized rate of 440,000 units in October, compared with 354,000 units in September, which represents an increase of 25.4 percent for the month. Compared with October 2012, the increase was 21.6 percent.
Though the strongest rise in many years, the current annualized rate is still historically low. From the 1970s to the mid-90s, sales fluctuated roughly between 600,000 and 800,000 units a year (except during recession), and throughout the rest of the ’90s and the pre-bubble early 2000s, 800,000 to 900,000 units was closer to the norm. New home sales hit an unsustainable 1.4 million units briefly in 2005, and it was downhill from there until recession low of less than 300,000 units.
The estimate of new houses for sale at the end of October was 183,000 units, according to the bureau. That represents a supply of 4.9 months at the current sales rate. The government considers a house for sale when a permit to build has been issued in permit-issuing places, or work has begun on the footings or foundation in nonpermit areas and a sales contract hasn’t been signed nor a deposit accepted.
Beige Book Reports Moderate and Modest Growth, Again
The latest Federal Reserve Beige Book was released on Wednesday, and the central bank resorted to its favorite terminology once again. Namely, economic growth was “moderate,” and that lighter shade of moderate, “modest.” The book explained that “activity in the New York, Cleveland, Richmond, Atlanta, St. Louis, Minneapolis, and Dallas Districts grew at a moderate pace, while Philadelphia, Chicago, Kansas City, and San Francisco cited modest growth. Boston reported that economic activity continued to expand.”
In the residential real estate industry, the Beige Book noted that some slowing in single-family home sales was attributed to seasonal factors. Still, sales remain above year-ago levels, with increasing demand, low to declining levels of inventory, and slowly rising new-home construction cited by almost all districts as reasons for a continued rise in home prices, but at a slower pace than earlier in 2013.
As for the commercial real estate realm, activity remained stable or improved slightly across many districts. The tech sector drove demand for commercial real estate in the San Francisco district, and Cleveland saw gains in affordable housing and shale-gas-related activity. The outlook is for continued CRE improvement in the Philadelphia, Atlanta, Kansas City, and Dallas districts, according to the book.
ADP Reports Strong Employment Gains
Automated Data Processing reported its employment numbers on Wednesday, ahead of Friday’s official government report. According to ADP, the private sector created a relatively strong 215,000 jobs. That was more than expected, but then again the ADP estimates often fail to predict the official numbers.
Wall Street bounced around on Wednesday, ending the day mixed. The Dow Jones Industrial Average lost 24.85 points, or 0.16 percent, while the S&P 500 was down 0.13 percent. The Nasdaq managed to eke out a 0.02 percent gain.
