The housing market seemed to be of two minds in October, but there was a report on the public’s post-election mood last week that ought to lift the business community’s spirits as the holiday season begins.
The University of Michigan’s final Consumer Sentiment Index for November came in at 93.8, more than eight points higher than the survey that was taken before the presidential election won by Republican Donald Trump.
“The initial reaction of consumers to Trump's victory was to express greater optimism about their personal finances, as well as improved prospects for the national economy,” Consumer Sentiment Index chief economist Richard Curtin said in a statement.
“The upsurge in favorable economic prospects is not surprising, given Trump’s populist policy views, and it was perhaps exaggerated by what most considered a surprising victory, as well as by a widespread sense of relief that the election had finally ended. To be sure, no surge in economic expectations can long be sustained without actual improvements in economic conditions.”
The consumer sentiment survey was a month more up to date than two reports on the housing market. New-home sales were lower, but home resales were higher in October.
Sales of new single-family houses dropped 1.9 percent for the month, to a seasonally adjusted annual rate of 563,000, the Census Bureau said Wednesday.
"The new-home sales market continues to underwhelm, taking baby steps forward and backward from month to month when what we really need to see are giant leaps," Svenja Gudell, chief economist at the real estate hub Zillow, said in a statement Wednesday that was cited in a U.S. News & World Report story.
"It's a bit like we're playing ball on a Little League field — we get excited when we hit what looks like a home run in a given month, but in a 'normal' park it would be a single at best."
A day earlier, the National Association of Realtors had a much more upbeat report about the home-resale market. The trade group said existing-home sales rose 2 percent in October, to a seasonally adjusted annual rate of 5.60 million, from an upwardly revised 5.49 million in September. The association said October's sales pace was 5.9 percent above a year earlier (5.29 million) and surpassed June's pace (5.57 million) as the highest since February 2007 (5.79 million).
"October's strong sales gain was widespread throughout the country and can be attributed to the release of the unrealized pent-up demand that held back many would-be buyers over the summer because of tight supply," National Association of Realtors chief economist Lawrence Yun said in a statement. "Buyers are having more success lately despite low inventory and prices that continue to swiftly rise above incomes."
"The good news is that the tightening labor market is beginning to push up wages and the economy has lately shown signs of greater expansion,” Yun added. “These two factors and low mortgage rates have kept buyer interest at an elevated level so far this fall."
Today economy watchers will see whether The Conference Board’s Consumer Confidence Index reflects the optimism that the University of Michigan’s survey did. Economists’ median forecast is that the index will rise about four points, to 102.5.
This week will bring a number of reports that gauge the consumer’s mood, but like last week, some will be more up to date than others.
Data Wednesday on personal income and consumer spending will be for October. The forecast is nonetheless bright — income is expected to rise 0.4 percent and spending to climb 0.5 percent amid expectations that core inflation will be held to 0.1 percent.
Thursday’s report on motor vehicle sales will be for November. The forecast is for sales at a seasonally adjusted annual rate of 17.7 million, below the 18 million pace of October, but a signal of steady, continuing growth.
As the economy continues to improve, the odds of an interest-rate increase when the Federal Reserve’s policy-making Federal Open Market Committee meets Dec. 13-14 grows more likely. Minutes from the Fed panel’s Nov. 1-2 meeting were released last week, and they show that the central bank sees higher inflation coming and wants to get ahead of it.
The minutes said most of the committee members believe it would be “appropriate to raise the target range for the federal funds rate relatively soon.”
“Some participants noted that recent committee communications were consistent with an increase in the target range for the federal funds rate in the near term or argued that to preserve credibility, such an increase should occur at the next meeting,” the minutes also said.
“Momentum was building for a move in December, and that remains the case,” Stephen Stanley, chief economist at Amherst Pierpont Securities, told the Wall Street Journal after the minutes were released.
Appearing before Congress last week, Fed chairman Janet Yellen said the central bank could act “relatively soon” if the economy continues to improve.
How better to gauge that improvement than with the November jobs report, which the Labor Department will release Friday. The median forecast is for 180,000 new jobs, up from 161,000 in October.
Numbers such as that might be the last bit of encouragement the Fed needs.