May 6, 2014 Real Estate Report - What a Week of News!

If it was the weather we would have called it the perfect storm. Last week we had a confluence of economic news which rarely is seen in a five day period. We started the week with the release of the index of pending sales. This measure has taken on new significance this spring since both existing and new home sales have languished because of the weather. Pending sales give us a peek at the future. On Tuesday the monthly consumer confidence index was released as the Federal Reserve Board started their meeting. Wednesday things really heated up with the release of the ADP private payroll report, the Fed made their announcement at the conclusion of their meeting and the preliminary estimate of the first quarter's economic growth was also announced. Thursday brought the weekly first time claims for unemployment, personal income and spending for March and the PMI manufacturing index. We ended the week with a bang with the release of factory orders and the monthly jobs report. So the next question is--how did the data come out? The answer to that is not so simple. We started with an increase in pending home sales, but sales are still slower than they were last year. The economic growth of 0.1% for the first quarter was disappointing, but many seem to think that the number will be revised later and definitely was affected by the weather which is a temporary factor. On Wednesday, the Fed's optimistic statement about the economy seemed to bear out this hypothesis regarding the slow first quarter. On Thursday the reports on personal spending and manufacturing came out on the positive side while first time claims for unemployment rose unexpectedly. In other words, we were left with a mixed bag coming into the release of the employment report which put us solidly in the plus column. Not only were there almost 300,000 jobs created in March, but the previous months were revised upwards by almost 100,000 jobs and the unemployment rate moved down to 6.3%, the lowest since September 2008. Keep in mind that the precipitous drop in the unemployment rate was at least partially due to workers leaving the labor force which means that there is still a long way to go until we solve the long-term unemployment issue and explains why the markets did not respond "euphorically" to the news. But certainly, the news this week was positive on balance and shows we are headed in the right direction after a pause for a long and cold winter. Keith Stewart 773-529-7000