We are ending the year with one last release of Existing Home Sales data for the month of November that, unfortunately, brought a gloomy note to last week’s festivities. Home sales fell to an annual rate of 4.76 million units, the lowest level since April 2014. On a percentage basis, they fell 10.5%, the largest decline in more than 25 years.
(The NKBA Economic Indicators Dashboard provides weekly insights on the economic status of the kitchen and bath industry, below you can read an explanation of each of the Dashboard’s variables.)
Indicators Point to Weak Economy
Four of our indicators are red, and we continue to see a mix of favorable and unfavorable indicators. This confirms the slow and weak economy that has persisted over the last six years, since the end of the so-called Great Recession.
It appears that one major reason for the drop in home sales is the new loan rules instituted by the “Consumer Financial Protection Bureau” as mandated by the Dodd-Frank bill. Although the rules became effective in early October, the learning process and adjustment to the rules may have pushed some mortgages to December. It is expected that once financial institutions become familiar with the rules and procedures, the process will return to normalcy.
The rule, called “Know Before you Owe” attempts to improve consumers’ understanding of the financial paperwork acquired when buying a home. Presumably, under this rule, prospective homeowners will have a greater understanding of their options, be able to compare-shopping for a loan, and end up with no surprises when they close the deal. We’ll see if that’s the case.
-Manuel Gutierrez, Consulting Economist
More Information About NKBA’s Economic Indicators Dashboard
The dashboard displays the latest value of each economic indicator with a colored triangle that highlights visually the recent trend for each of the drivers. “Green” is a positive signal indicating that the latest value is improving; “Yellow,” as its common understood denotes caution because the variable maybe changing direction; and “Red” indicates that the variable in question is declining, both in its current value and in relation to the recent past.
Note that all the data, except for “mortgage rate” and “appliance store sales” are seasonally adjusted and are represented at annual rates.
Remodeling Expenditures. This is the amount of money spent on home improvement projects during the month in question. It covers all work done for privately-owned homes (excludes rentals, etc.). The data are in billions of and are issued by the U.S. Department of Commerce, which compiles and releases the data on a monthly basis.
Single Family Starts. It’s the number of single family houses for which construction was started in the given month. The U.S. Department of Commerce compiles and releases the data on a monthly basis.
Existing Home Sales. These data are issued monthly by the National Association of Realtors, and capture the number of existing homes that were sold in the previous month.
Mortgage Rate. We have chosen the rate on 30-year conventional loans that is issued by the Federal Home Loan Mortgage Corporation (known popularly as Freddie Mac.) Although there are a large number of mortgage instruments available to consumers, this one is still the most commonly used.
Employees in Residential Remodeling. This indicator denotes the number of individuals employed in construction firms that do mostly residential remodeling work.
Building Materials Sales. These data, released monthly by the Department of Commerce, capture the total sales of building materials, regardless of whether consumers or contractors purchased them. However, we should caution that the data naturally includes sales to projects other than residential houses.
Appliance Store Sales. This driver captures the monthly sales of stores that sell mostly household appliances; the data are stated at an annual rate. We should not confuse this driver with total appliance sales, since they are sold by other types of stores such as Home Centers, for instance.
We hope that you find this dashboard useful as a general guide to the state of our industry. Please contact us if you would like to see further detail.
