Summary for Week Ending Oct 26th

There was some disappointing data last week - mostly from some regional manufacturing surveys, but also mortgage delinquencies increased - but overall this was the fourth week in a row with somewhat better than expected data, and this suggests a little pickup in economic activity.

Once again housing beat expectations.  New home sales increased to 389,000, a pace well above the 306,000 sales in 2011, and the highest level since the tax credit related spike in April 2010.  Q3 GDP was weak, but slightly above expectations - and residential investment was a fairly strong contributor to growth.

The Architecture Billings Index is now showing expansion (an indicator for commercial real estate including apartments).  And the trucking index increased in  September (although this index has been moving sideways this year). 

On the downside, the Richmond and Kansas City Fed manufacturing surveys were weak and indicated contraction in October. The recent trend is continuing: housing is improving, but manufacturing is struggling.

Here is a summary of last week in graphs:

' New Home Sales at 389,000 SAAR in September

Click on graph for larger image in graph gallery.

The Census Bureau reported New Home Sales in September were at a seasonally adjusted annual rate (SAAR) of 389 thousand. This was up from a revised 368 thousand SAAR in August (revised down from 373 thousand). This is the highest level since April 2010 (tax credit related bounce).

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Starting in 1973 the Census Bureau broke inventory down into three categories: Not Started, Under Construction, and Completed.

This graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale was at a record low 38,000 units in September. The combined total of completed and under construction is just above the record low since "under construction" is starting to increase.

Even though sales are still very low, new home sales have clearly bottomed. New home sales have averaged 364 thousand SAAR over the first 9 months of 2012, after averaging under 300 thousand for the previous 18 months.  Sales are finally above the lows for previous recessions too.

This was slightly above expectations of 385,000, and was another fairly solid report. This indicates an ongoing recovery in residential investment.