New Home Sales Jump in March, Reach the Highest Level Since March of Last Year… March new home sales increased 9.6% over February, reaching the highest level since March 2022, but were still down 3.4% over the last year.
What it means— The fight between sellers and buyers continues. The lack of transactions would seem to give buyers an edge, but the median new-home sale price rose to $449,800, which was 3.2% higher than last March. Potential sellers don’t seem to be under pressure to sell yet and likely aren’t too keen on taking out their next mortgage at more than 6%, which keeps inventory off the market. This keeps prices high for new inventory, even though mortgage rates are still elevated compared to rates in the 2010s. We’ll see if the Fed gives us a hint of a pause this week, which should push mortgage rates lower and motivate both real estate sellers and buyers.
U.S. First-Quarter Gross Domestic Product Up 1.1%, Missing 2.0% Estimate… The U.S. Bureau of Economic Analysis (BEA) estimated that the economy expanded by an annualized rate of 1.1% last month, held back in part by high inflation.
What it means— Investors sort of cheered the weak gross domestic product numbers, because they give the Fed room to pause rate hikes. Analysts from Citi Group to Goldman Sachs expect a recession this year, and these numbers bring us one step closer, but we should be wary. Although private inventories and non-residential fixed investment fell, consumer spending remained resilient. If that trend continues, retailers will have to restock over the summer, ahead of the holiday season. We might not have a booming economy, but we might not fall into a deep recession, either.
Personal Consumption Expenditures Index Increased 0.1% in March After Rising 0.3% in February… For the year, the Personal Consumption Expenditures Index (PCE) increased 4.2%, almost one percent lower than the 5.1% last month.
What it means— Falling energy prices drove the PCE lower. Core PCE, excluding food and energy, rose 0.3% and kept the annual change at 4.6%, off just 0.1% from the annual change last month. Consumer spending on goods and services remained almost flat but keeping inflation stubbornly high, which left housing as the driver for March.
As we’ve covered several times, private estimates show rents falling, so investors are encouraged that PCE and CPI will fall closer to the Fed’s target over the summer. All of this should lead the Fed either to raise rates by 0.25% this week or to hold rates steady and then call for a pause in raising rates for the foreseeable future.
The news drove investors to push the markets higher as they expect the Fed to step aside. That seems right, but it’s not like the Fed is moving to the sidelines because things are so good. They forecast a recession. After getting close to 4,200 on the S&P 500, it’s time for investors to be cautious. After all, the major indexes are still a moon-shot away from the all-time highs.
On the other hand, commercial office rents have dropped so much that owners are opting for “jingle-mail” and defaulting on loans which will be a drag on economic data. As for the “Good, Bad and the Ugly,” the bad is foreclosures will persist for years. The good is the banks won’t be hurt. The ugly is individuals invested in Commercial Backed Mortgage Securities will lose all.
Southwest Flight Delayed Because Passenger Won’t Fess Up to Making a Mess… On April 15, Southwest delayed a flight from Atlanta to Houston for an hour after a passenger spilled what looked like a full container of rice in the aisle. The flight attendants asked whoever made the mess to pick it up so that they could continue the departure process, but no one came forward. The longer it took, the angrier one of the attendants became. Eventually, the flight attendant cleaned up the spill, noting that it was a safety hazard if left in the aisle. As she cleaned, she let the passengers know they weren’t raised right and that she was disappointed in all of them, according to one account on Twitter.
Data supplied by HS Dent Research
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