It’s Friday and that means it’s time to review the latest economic data and identify which pockets of the economy are heating up and which are slowing down. Don’t worry about catching every headline and every report throughout the week—I recap all of the most important news impacting your wealth right here every Friday. Let’s take a look at this week’s big headlines…
July Existing Home Sales Running at Multi-Year Low
The National Association of Realtors on Wednesday announced that existing home sales slipped 0.7% in July. Existing home sales are now running at a 5.34 million annual pace, the slowest in since February 2016. Existing home sales have now declined for four straight months, so this is now an established trend. The culprits are higher mortgage rates, tight inventories and higher median home prices.
Breaking it down by region, an 8.3% drop in Northeast home sales weighed on overall existing home sales. However, sales in the Midwest and South also declined. Only the West reported higher existing home sales in July. Currently, there is a 4.3-month supply of existing homes for sale. Historically speaking, this is a very tight supply, so it could continue to cause median home prices to continue rising.
July New Home Sales Dragged Down by Northeast
The Commerce Department announced that new home sales declined 1.7% in July to an annual rate of 627,000. This is the slowest pace for new home sales since last October. July’s sales were dragged down by a huge 52.3% drop in new home sales in the Northeast. This represents the largest one-month decline in that region since 2015.
Growing affordability problems and a lack of inventory continue to weigh on new home sales. One factor could be that itemized deductions, like mortgage interest, have been capped at $7,500 in 2018. I suspect that this is weighing on new home sales, especially in high tax states.
Durable Goods Fall on Commercial Aircraft Cancellations
On Friday, the Commerce Department announced that durable goods orders declined 1.7% in July. This was much larger than economists expected; they were looking for a 0.8% decline. Breaking it down, new transportation orders fell 5.3%. The big culprit was a 35.4% plunge in commercial aircraft orders. Boeing has had some big orders cancelled recently.
However, excluding transportation, durable goods orders actually climbed 0.2% in July. Even better, business investment, excluding aircraft, rose a robust 1.4%. Overall, durable goods orders have risen 8.6% in the first seven months in 2018 compared a year ago. This is a good sign that they should contribute to GDP growth.
That’s all I have for you this week. I’ll be in touch again next week with the latest ratings out of Portfolio Grader.
Until next week,