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July 24, 2017 By Peter Boockvar

Mfr’g, services / Housing data


United States

Markit’s manufacturing and services composite index for July rose .3 pts to 54.2 led by a m/o/m gain of 1.2 pts in manufacturing. The services component was unchanged at 54.2. The composite index is at the best level of 2017 and just off the 54.9 print seen in both October and November. With manufacturing, Markit said the rise was “supported by accelerated growth in output, new orders, employment and stocks of inputs during July.” Input prices rose slightly as “some manufacturers commented on higher commodity prices (especially metals).” Output prices though fell to the lowest since November 2016. While the headline services figure was unchanged, new orders did rise to a 2 yr high and employment improved. With prices, “anecdotal evidence suggested that higher staff salaries had placed upward pressure on costs.” Prices received though fell to a 3 month low.

Bottom line, according to Markit, Q3 started out on a good note but they also said “the overall rate of expansion remains modest rather than impressive” and the current levels of their figures are still consistent with just 2% growth. This data follows the mixed picture with the NY and Philly manufacturing indices. The current estimates for ISM’s measure of manufacturing and services right now and out next week is estimated to moderate m/o/m. As for Q2 GDP growth, that figure gets reported on Friday and 2.5% growth is anticipated following a 1.4% print in Q1. As for the market response, because of its limited history, US stocks and bonds don’t really respond to the Markit data for the US. Markit is more influential with their data overseas.

….

Existing home sales in June totaled 5.52mm annualized, 50k less than expected and down 100k from May. This is a 4 month low and these closings were likely for contracts signed in the March thru May time frame. The number of homes for sale did decline off the highest amount since October but not as much as the drop in sales so the inventory to sales ratio rose to 4.3 from 4.2 and that is the most since October even though it remains well below the historical average of around 6 months. Home prices continue on their persistent gains well above the general rate of inflation. Prices were up 6.5% y/o/y. While low mortgage rates help to cushion that, it means a higher and higher down payment that is needed and maybe why first time buyers slipped for a 2nd month back to 32% of all sales and back to the lower end of the range. There were sharp declines in the number of homes that ‘all cash’ and ‘investors’ purchased as a percentage of total sales. Maybe this is also in response to record high prices. ‘All cash’ buyers are at the lowest level since June 2009. Individual investors make up many of these cash sales.

The NAR continues to cite low inventory and coincident high prices “that’s straining” the budget of buyers. Importantly, they are still seeing “strong” demand but on the other hand they also say “the severe housing shortages inflicting many markets are keeping a large segment of would be buyers on the sidelines.” The median home price at $263,800 is at a record high. See chart below. Much of this is due to mix as sales of homes priced below $250k fell sharply y/o/y while sales of homes priced between $250-500k are up 11.4%, priced between $500-750k is higher by 18.5%, those sold between $750-$1mm is up by almost 18% and homes sold above $1mm has jumped by 19.1% y/o/y.

Bottom line, existing home sales data is always dated because it measures closings and more relevant to look at for price and inventory data where both are resulting in challenges still for those first time buyers where many can’t afford a home worth more than $250k and why they keep renting.

MEDIAN HOME PRICE

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Filed Under: Latest Data

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About Peter

Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.

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Disclaimer - Peter Boockvar is an independent economist and market strategist. The Boock Report is independently produced by Peter Boockvar. Peter Boockvar is also the Chief Investment Officer of Bleakley Financial Group, LLC a Registered Investment Adviser. The Boock Report and Bleakley Financial Group, LLC are separate entities. Content contained in The Boock Report newsletters should not be construed as investment advice offered by Bleakley Financial Group, LLC or Peter Boockvar. This market commentary is for informational purposes only and is not meant to constitute a recommendation of any particular investment, security, portfolio of securities, transaction or investment strategy. The views expressed in this commentary should not be taken as advice to buy, sell or hold any security. To the extent any of the content published as part of this commentary may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. No chart, graph, or other figure provided should be used to determine which securities to buy or sell. Consult your advisor about what is best for you.

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