- INDICATOR: February New Home Sales and Weekly Jobless Claims
- KEY DATA: Sales: +6.1%; Median Prices (Over Year): -4.9%/ Claims: +15,000
- IN A NUTSHELL: “The housing market is moving forward, but how far and how fast may be determined by future increases in the mortgage rate.”
WHAT IT MEANS: Yesterday we saw the existing home sales fell in February. That seemed odd given the warm weather. But those are closings, not purchases and new home sales are only for single-family dwellings. Today’s report that new home purchases were up solidly in February makes more sense. These are contracts and the warmest month on record in many areas undoubtedly got people out and about and visiting construction sites. Demand was strong in three of the four regions with only the Northeast posting a decline, which was large. Sales in the Midwest soared, which more than made up for the drop in the Northeast. Interestingly, home prices declined. Inventory remains near historic lows and you would expect the strong demand to have pushed up costs. The price data were strange in that the median was down over the year but the average was up double-digits Sales in the winter months are usually light so any moderate change in the distribution of demand tends to have an outsized impact on the seasonally adjusted numbers.
Jobless claims jumped last week more than expected. The increase only moves things back to very low levels from the extraordinarily low levels they have been at. There is really little to worry about here.
MARKETS AND FED POLICY IMPLICATIONS: The most important number today, or maybe in the early hours of tomorrow, is the vote on the AHCA. The two sides of the Republican Party want exactly the opposite changes in the bill and the only thing that seems to making sense for the politicians is the fear of not being re-elected. For conservatives who have been saying that they want to repeal, and more lately replace Obamacare with a more market-based plan, the Republicancare bill falls far short. However, it may be their best chance to do what for seven years they said they wanted to do. For more moderate Republicans, even if they ran on opposition to Obamacare, the negative impacts on their constituents’ coverage and on their states’ coffers from the loss of Medicaid funds are real threats to their re-election. What is distressing is that no one seems to be voting for the bill because it is actually a good proposal. It isn’t good for most recipients and it doesn’t make politicians of any stripe happy – and that’s after changes have already been made. More modifications are likely to come in the next few hours, but they will be done to attract votes. Meanwhile, the president is twisting arms not by saying this is great for people and the health care system but that it is needed for political reasons. Obamacare needs improvement but getting health care reform done quickly should not be more important than getting it done right.
Joel L. Naroff is the president and founder of Naroff Economic Advisors, a strategic economic consulting firm.
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