March new home sales in March totaled 621k, 37k more than expected and up from 587k in February which was revised down by 5k. The 621k is just 1k from matching the peak in this cycle but still has progress to make to get back to the 25 year average of 715k. Home sales out West led the way. The median home price was up by 1.2% and months’ supply fell to 5.2 from 5.4 but is around the long term average of around 6 months unlike what is seen with existing homes. From a price perspective, most of the new homes again were those priced above $300,000 but we did see a pick up in homes sold priced below $150k. This is the area of the market that can most entice the cash strapped first time buyer from renting but is also the least profitable for builders.
Bottom line, the spring selling season has had a pretty good start notwithstanding higher mortgage rates y/o/y in March. Looking at April mortgage applications so far has purchases though about flat y/o/y. I’ll say the industry continues to play catch up and the rise in rates hasn’t had that much of an impact. That said, this all comes in the context of a homeownership rate that is still hovering around 60 year lows. Rent increases of 4-5% continues to be matched by home price gains at a similar pace with both rising twice the rate of consumer price inflation. Builder stocks are down by 1% but mostly off the Pulte earnings news. Pulte though was positive in the earnings release saying this: “Buying interest during the spring selling season of 2017 has been high and points to the ongoing strength in recovery for the housing industry.” The market didn’t like the slowdown in their order rates and drop in gross margin.
The April Conference Board Consumer Confidence index fell 4.6 pts to 120.3 and that was 2 pts below the forecast. This though does come after a nearly 9 pts rise in March. Both the Present Situation and Expectation components were down as was confidence in business conditions. Those that said jobs were Plentiful fell 1 pt but after a 5 pt jump last month. Those that said jobs were Hard To Get were little changed. Disappointingly there was a 3.2 pt drop in those expecting an Increase in Income which completely gives back the March rise.
Buying intentions were mixed. Those that plan to buy a car/truck within 6 months did improve by .4 pts to the best since 2012. We’ll see if that shows up in the auto data which has seen the opposite trend. Those that plan to buy a home fell .4 pts to a 3 month low. Those that plan to purchase a major appliance was higher by 1.1 pts to the most since January 2016. Lastly, one year inflation expectations stayed the same at 4.7%.
The Conference Board’s bottom line is that “Despite April’s decline, consumers remain confident that the economy will continue to expand in the months ahead.”
My bottom line is confidence continues to be buoyed by post election hopes for tax and regulatory reform which we will get in some form. However, the confidence increase has yet to show up in any of the consumer spending data in the aggregate where we might see a decline in real spending in Q1. As I’ve said many times, don’t take this data to mean anything about what’s to come in the future as its really only a snapshot of how people feel today.