Real Estate

The key indicator for the housing market was released today, The National Association of Realtors Pending Home Sales Index.  The index sunk 16% down to 96 in November from the upwardly revised 114.3 in October - the first decrease since last January.

The drastic increase in sales previously was caused by the buyers race to close their deals before the initial expiration of the first-time home buyer tax credit.  The decrease, however, still put the index above the level a year ago.  Lawrence Yun, the National Association of Realtor’s chief economist, said the drop was expected.  (Home sales usually go down in the Winter, however, the numbers stated and the above graph are all seasonally adjusted.)  Interestingly enough analysts surveyed by Dow Jones Newswires were not as expectant as the decline more than tripled their expectations.  Yun also added, “The fact that pending home sales are comfortably above year-ago levels shows the market has gained sufficient momentum on its own. We expect another surge in the spring as more home buyers take advantage of affordable housing conditions before the tax credit expires.”

Auto Sales

Auto sales for December, unlike pending home sales, increased.  This is welcome news considering this increase is without the government’s famed “Cash-4-Clunkers” incentive.

The numbers still aren’t great.  Before the recession auto sales were up to 16 million.  Those sales were often fueled by unusually low interest rates - people had to practically have money given to them to buy a car.  Car companies may have to realize this was not a realistic number to project budgets off of as their fixed costs are now not being recovered by the slumped sales.  It seems as if they have made the realization (mainly because they didn’t have a choice) as we have witnessed the closing of many auto factories.  This new level of auto sales may be the new standard, and that’s not necessarily awful.

Factory Orders

When the recession hit, the consumer locked up and started saving for the unknown.  Businesses had forecasted their inventories for that unknown and at the time one of the worst recessions in decades wasn’t in the cards.  Businesses were forced to slash their inventories and curtail production to fall to the lower demand.  However, the consumer has slowly wound the combination of the padlock on his wallet and the chains are coming off - the consumer is spending again.  The businesses can now spend again as well to meet the demand.  Factory orders in the U.S. rose 1.1% in November according to the Commerce Department, more than twice as anticipated, a sign companies are increasing production.  This further solidified the foundation of the idea of an intact manufacturing sector that was set by the ISM’s report released yesterday.