Sunday, November 25, 2018

October’s durable goods, new housing starts, and existing home sales

Widely watched reports released this week included the Advance Report on Durable Goods for October and the October report on New Residential Construction, both from the Census bureau, and the Existing Home Sales Report for October from the National Association of Realtors (NAR)...

October Durable Goods: New Orders Down 4.4%, Shipments Down 0.6%, Inventories Unchanged

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for October (pdf) from the Census Bureau reported that the value of the widely followed new orders for manufactured durable goods decreased by $11.5 billion or 4.4 percent to $248.5 billion in October, after September's new orders were revised from the $262.1 billion reported last month to $260.0 billion, now a 0.1% decrease from August, rather than the 0.8% increase previously reported...year to date new orders are still 8.7% above those of 2017, down from the +8.9% year over year change we saw in this report last month....the volatile monthly change in new orders for transportation equipment was responsible for the October orders drop, as new transportation equipment orders fell $11.7 billion or 12.2 percent to $84.7 billion, on a 59.3% decrease to $4,710 million in new orders for defense aircraft and a a 21.4% decrease to $10,499 million in new orders for commercial aircraft....excluding orders for transportation equipment, other new orders rose 0.1%, while excluding just new orders for defense equipment, new orders fell 1.2%....meanwhile, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, fell by a statistically insignificant $31 million to $69,356 million...

At the same time, the seasonally adjusted value of October shipments of durable goods, which will be included as inputs into various components of 4th quarter GDP after adjusting for any changes in prices, decreased by $1.4 billion or 0.6 percent to $254.5 billion, after September shipments were revised from $256.8 billion to $255.9 billion, now up just 1.0% from August...shipments of transportation equipment were down $1.6 billion or 1.8 percent to $87.6 billion, while all other durable goods shipments showed a 0.1% increase...of those, shipments of nondefense capital goods less aircraft rose 0.3% to $68.8 billion, after September capital goods shipments were revised 0.3% lower..

Meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, fell for the 2nd time in 3 months, but only by $0.1 billion to $410.9 billion, after September inventories were revised from $410.7 billion to $411.0 billion, now up 0.8% from August...a $0.4 billion or 1.0 percent decrease to $43.1 billion in inventories of computers and electronic products was responsible for the inventories decrease, while the value of transportation equipment inventories rose 0.4% to $131.0 billion...

Finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but volatile new orders, decreased for the first time in 9 months, falling by $2.0 billion or 0.2 percent to $1,183.0 billion, after September unfilled orders were revised from $1,186.1 billion to $1,185.051 billion, now a 0.7% increase from August....a $2.9 billion or 0.4 percent decrease to $815.1 billion in unfilled orders for transportation equipment was responsible for the October decrease, as unfilled orders excluding transportation equipment orders were up 0.2% to $367,943 million...compared to a year earlier, the unfilled order book for durable goods is still 4.8% above the level of last October, with unfilled orders for transportation equipment still 4.7% above their year ago level, largely on a 10.5% increase in the backlog of orders for defense aircraft.... 

Little Change in Housing Starts and Building Permits in October

The October report on New Residential Construction(pdf) from the Census Bureau estimated that new housing units were being started at a seasonally adjusted annual rate of 1,228,000 units during the month, which was 1.5 percent (±12.9 percent)* above the revised September estimated annual rate of 1,210,000 housing unit starts, but was still 2.9 percent (±10.4 percent)* below last October's pace of 1,265,000 housing starts a year...the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell from September or even from those in October a year ago, with the figures in parenthesis the most likely range of the change indicated; in other words, in other words, October's housing starts could have been down by 11.4% or up by as much as 14.4% from those of September, with even larger revisions possible after a number of months...with this report, the annual rate for September housing starts was revised from the 1,201,000 reported last month to 1,210,000, and the annual rate for August housing starts, which was revised from 1,282,000 to 1,268,000 last month, was revised back up to 1,280,000 with this report...

Those annual rates of starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by canvassing Census field agents, which estimated that 107,300 housing units were started in October, up from the 106,900 units that were started in September...of those housing units started in October, an estimated 74,600 were single family homes and 30,900 were units in structures with more than 5 units, down from the revised 75,300 single family starts in September, and down from the 31,000 units started in structures with more than 5 units in September...

The monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data...in October, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,263,000 housing units, which was 0.6 percent (±2.4 percent)* below the September rate of 1,270,000 permits, and was 6.0 percent (±1.6 percent) below the rate of building permit issuance in October a year earlier...the annual rate for housing permits issued in September was revised from 1,241,000 to 1,270,000....again, these annualized estimates for new permits reported here were extrapolated from the unadjusted estimates provided monthly by canvassing census agents, which indicated that permits for 112,500 housing units were issued in October, up from the revised estimate of 99,400 new permits issued in September...the October permits included 74.200 permits for single family homes, up from 65,000 single family permits issued in September, and 34,800 permits for housing units in apartment buildings with 5 or more units, up from 31,100 such multifamily permits a month earlier...

For more graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts Increased to 1.228 Million Annual Rate in October and Comments on October Housing Starts..

Existing Home Sales Rose 1.4% in October

The National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales rose by 1.4% from September to October, the first increase in 7 months, projecting that 5.22 million existing homes would sell over an entire year if the October home sales pace were extrapolated over that year, a pace that was still 5.1% below the 5.50 million annual sales rate projected in October of a year ago...September sales, indicated at a 5.15 million annual rate, were revised but were statistically unchanged from last month's report...the NAR also reported that the median sales price for all existing-home types was $255,400 in October, 3.8% higher than in October a year earlier, which they report as "the 80th straight month of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Increase for the First Time in Six Months" even though it was the first time in seven months, is in easy to read plain English, so if you're interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release...as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

Since this report is entirely seasonally adjusted and at a not very informative annual rate, we like to look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month...this unadjusted data indicates that roughly 446,000 homes sold in October, up by 5.9% from the 421,000 homes that sold in September, but down by 2.6% from the 458,000 homes that sold in October of last year, so we can see that the seasonal adjustment reduced the sales increase reported in the annualized published figures......that same pdf indicates that the median home selling price for all housing types fell 0.6%, from a revised $256,900 in September to $255,400 in October, while the average home sales price was $294,200, down 0.6% from the $296,000 average sales price in September, but up 2.3% from the $287,600 average home sales price of October a year ago...regionally, average home sales prices ranged from a low of $226,300 in the Midwest to a high of $403,900 in the West, with all regions showing a decrease in the average sales price for the month...for both seasonally adjusted and unadjusted graphs and additional commentary on this report, see the following two posts from Bill McBride at Calculated Risk: NAR: Existing-Home Sales Increased to 5.22 million in October and Comments on October Existing Home Sales..

 

(the above is the synopsis that accompanied my regular sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links, most picked from the aforementioned GGO posts, contact me…)      

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