Personal Incomes Rise, Home Sales Plummet
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Personal incomes and spending rose, but home sales fell significantly despite expectations of growth.
Pending home sales fell 1.4% in August compared to the prior month, while remaining 6.1% above the level of total pending home sales in August 2014. The National Association of Realtors released a report containing its Pending Home Sales Index, which the NAR says indicates a fall in total home sales is coming later in the year.
Personal incomes and spending rose, but home sales fell significantly despite expectations of growth.
Pending home sales fell 1.4% in August compared to the prior month, while remaining 6.1% above the level of total pending home sales in August 2014. The National Association of Realtors released a report containing its Pending Home Sales Index, which the NAR says indicates a fall in total home sales is coming later in the year.
NAR Chief Economist Lawrence Yun attributes the weakness to a decline in house affordability, as prices continue to rise from their recessionary lows in 2009. “Pending sales have leveled off since mid–summer, with buyers being bounded by rising prices and few available and affordable properties within their budget,” Yun said, adding that housing supply and new construction remain depressed.
Yun believes changes in the mortgage closing process “could delay some sales” and that volatility in the stock market could also be causing some people to put off home purchases as fears about the broad economy has buyers holding off a purchase. “The possibility of a government shutdown and any ongoing instability in the equity markets could cause some households to put off buying for the time being,” he said.
Pending home sales fell in almost all regions. In the south, there was a 2.2% decline and the northeast saw a 5.6% decline in August. The Midwest saw a decline of 0.4% at the same time. Several regions have seen strong pending home sales growth throughout 2014 and early 2015, so the results in August indicates a reversal of a previous expansionary trend
Incomes, Spending Rise
Despite weakness in the property market and continued tumult in the equities market, the Bureau of Economic Analysis reported personal incomes and spending are up, with Personal Consumption Expenditures (PCEs) up 0.4% in August. Incomes rose 0.3% at the same time.
In total, personal consumption rose $54.9 billion, after rising $69.6 billion in July. Disposable personal income also saw a strong increase, of $47.1 billion, or 0.4%. That indicates Americans will have greater purchasing power and greater ability to buy discretionary goods and services throughout the broader economy.
Personal income growth fell slightly after accelerating to 0.5% in July, but analysts believe income and outlay growth are likely to continue throughout the year. The trend is bolstering retail sales and is likely to contribute to strengthening GDP growth, which has encouraged many analysts to increase estimates for total spending throughout the United States, even as market expectations softened due to weakness in global macroeconomic data.
Last week, the Commerce Department announced the U.S. saw 3.9% annualized GDP growth in the second quarter, and many economists have since upgraded their GDP expectations for the year. The Atlanta Federal Reserve’s GDPNow, one of the most bearish predictions of growth in the U.S., revised upwards its expectations to 1.8% annual GDP growth for the U.S.
