Housing Market Remains Very Weak
Subscribe today for Free Enterprise Updates
- Latest business trends and best practices
- News about legislation and regulation impacting business
- Business how-to articles from industry experts
- Commentary and interviews with newsmakers in business and politics
GDP was revised lower in the second quarter, and the housing market contracted sharply in July. Durable goods orders are pointing to slower investment growth in the third quarter.
Gross Domestic Product
GDP declined to a 1.6% annual rate in the second quarter from an initial estimate of 2.4%. Consumption and business investment were revised up; however, these gains were offset by slower inventory investment and a huge ($107 billion) decline in net exports. Personal consumption expenditures increased at a 2.0% annual rate in the second quarter, up from 1.9% in the first quarter. Consumer spending remains positive but weak. The latest GDP report also shows that corporate profits are up for the sixth consecutive quarter and have nearly recovered to their pre-recession peak. Despite some positive signs, the recession was worse than previously thought, and the pace of growth has been slowing rather than accelerating.
Existing Home Sales
Sales of existing homes plummeted 27.2% to 3.83 million annualized units in July from 5.26 million units in June. Over the year, sales are down 25.5%. Inventory increased 2.5% to 3.98 million homes from 3.89 million in June. At the current sales rate, the months’ supply is 12.5, up from 8.9 in June. Median home prices decreased 0.2% to $182,600 in July from $183,000 in June but are up 0.7% over the past year. Sales continue to fall short of expectations, and with foreclosure rates still elevated, we should see only slow and gradual improvement.
New Home Sales
New home sales were extraordinarily weak in July, falling to 276,000, a new low. Sales fell 12.4% and were down 32.4% over the year. The months’ supply increased to 9.1 from 8.0 in June. Median home prices declined 6.0% in July to $204,000 from $217,000 in June. Over the year, prices are down by nearly 5%. The housing market remains very weak, reflecting the lack of job growth and weak consumer confidence.
Durable Goods Orders
New orders for durable manufactured goods rose 0.3% in July, following June’s 0.1% decline. Transportation equipment was a key reason for the increase. The remaining categories were much worse than expected. Core capital orders fell 8%, and shipments dropped 1.5%. Shipments rose 2.2%, and inventories were up 0.6%—the seventh straight increase. Despite the positive increase in July, the data are pointing to weaker investment in equipment and software than we saw in previous quarters.