Decoding the information on home sales and consumer spending

An uptick in February pending home sales followed a precipitous January drop. consumer spending logged a modest February increase that was rendered flat after adjusting for inflation. Stocks edged upward on the new data and real estate analysts expect the trend in pending home sales to continue as the economy improves. Post resource – Analyzing new data on pending home sales and consumer spending by MoneyBlogNewz.

consumer spending changes with inflation

The Commerce Department states a rise from January to February in consumer spending. It went up 0.7 percent. Consumer spending has risen eight months in a row, however February’s increase, adjusted for inflation, is just 0.3 percent, matching the increase reported in January. Rising food and energy prices pushed up inflation in February. The fastest rate since June 2009 was recorded by the Commerce Department in the personal consumption expenditures price index increase. In January it was 0.3 percent while going to 0.4 percent in February. February's 0.3 percent increase in personal income was more than canceled out with the consumer expenditures price index increase. In order to cover rising food and energy costs, households have been going into savings. From January to February, there was a decrease in savings from $710.5 billion to $676.7 billion.

Sales of homes determines economy

Pending home re-sales increased 2.1 percent in February after dropping 2.8 percent in January, according to the National Association of Realtors. There was a drop from February 2010 though. It totaled a 9.3 percent drop. Pending home sales represent signed contracts. They’re an economic indicator for this very reason. After the contract closes, the existing home sales personal details are then affected in a few months. There was a 9.6 percent decrease in February in existing home sales which accounts for 95 percent of today's market. The increases since February 2002 in home values have all been erased now. This is because since February 2010, there has been a 5.2 percent decrease in existing residences sales. In February, there was a 17 percent decrease in new home sales which is the lowest recorded rate. There was an 8.9 percent decrease from February 2010 in new home sales also.

Is it going to get any lower

Because home costs continue to fall, the National Association of Realtors expects existing home sales to eventually rise 5 to 10 percent overall in 2011. Very few people are getting regardless of the truth that housing has become so affordable it should be one of the most attractive investments in the U.S. Renting a home costs more currently than it would to pay mortgages and homeownership costs in several markets, suggests Deutche Bank. In fact, 28 of the 54 major markets are this way. Optimistic real estate analysts are betting that this affordability will eventually entice potential homeowners into pulling the trigger. The re-emergence of homebuyers could start raising housing costs in many markets, which could get even more homebuyers off the fence.

Citations

Bloomberg

bloomberg.com/news/2011-03-28/pending-sales-of-u-s-existing-homes-unexpectedly-climbed-2-1-in-february.html

New York Times

nytimes.com/2011/03/29/business/economy/29econ.html?src=busln

Fortune

finance.fortune.cnn.com/2011/03/28/real-estate-its-time-to-buy-again/