New Residential Homes Sales and Inventory Months of Supply – Easy Trends (thru April 2015)

Sales of new residential homes contributes to the GDP, and the level of supply can indicate something about prices. I’m continuing a feature called “Easy Trends” – a place where I’ll analyze the recent trend for an indicator (in this one, it is new residential homes sales and inventory) and discuss whether it is currently going up, down or neither. You can read the basics of my methodology on the FAQ page.

NOTE: You may be reading an outdated analysis. Please visit my latest new residential homes inventory months of supply trend analysis for more info.

Quick ‘n Easy

For new residential homes reports, there are two key things to look at: 1) number of homes sold and 2) inventory of homes for sale. When there are too many new residential homes still left unsold (inventory) on the market, it usually means that prices will be dropping because supply is greater than demand. A good way of measuring the inventory is to calculate how long it would take that inventory to sell at the current pace of sales. The normal level of supply for new residential homes is a little less than 6 months.

For new residential homes reports, there are two key things to look at: 1) number of homes sold and 2) inventory of homes for sale. We care about the number sold because each one contributes to the overall economy (builders get paid, brokers get paid, companies that made the raw materials get paid, etc). We care about inventory because when there are too many new residential homes still left unsold (inventory) on the market, it usually means that prices will be dropping because supply is greater than demand. The opposite is true if there is very low inventory. A good way of measuring whether current levels of new residential homes are too high or too low is to calculate how long it would take the current inventory to sell at the current annual pace of sales. For example, if there are 150,000 unsold new residential homes with the most recent report saying the annual pace of sales was 225,000, here’s what the calculation would look like:

Example:
225,000 new residential homes sold per year
divide by 12 to get 18,750 new residential homes sold per month
150,000 unsold homes divided by 18,750 sold per month = 8 months supply

Here’s a graph of the New Residential Homes Sales followed by Inventory Months of Supply from Calculated Risk:

New Residential Homes Sales April 2015 - Calculated Risk

Courtesy: CalculatedRiskBlog.com

New Residential Homes Inventory Months of Supply April 2015 - Calculated Risk

Courtesy: CalculatedRiskBlog.com

New Residential Homes Trends and Projections

Below, I will discuss whether the indicators are currently in a trend, when the last confirmed trend was and what that says about projecting the next data points to be released. I usually start my trend analysis from about three years ago.

continue reading…

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Stock Market Technical Analysis – Tech It Easy (thru May 22, 2015)

Stock market technical analysis is all you need to know, complete hogwash or somewhere in between. It depends on who you ask. If you find it interesting, you’ll probably like reading this weekly feature.

NOTE: You may be reading an outdated article. Please visit my latest stock market technical analysis summary of the S&P 500 for more.

I used to have screenshots of the various stock market technical analysis assessments I present below, as well as a bit more analysis for each one. In order to save time, I will not be doing the screenshots and will abbreviate some of the text for each analysis as well. The last time I did a comprehensive analysis can be foundhere, in case you want to see what it looked like.

The next few paragraphs are my standard intro to stock market technical analysis – you can skip down to the table (or click “continue reading”) if you read this feature regularly: 

Many people who trade in the markets believe that there are patterns that can generally lead to profitable trades. By analyzing stock charts that show the change in price along with the volume (how many shares were traded), “technical analysts” believe they have an edge and can time their trades profitably. There is significant controversy over this subject, however. Others say that, unless you have some information that no one else does, basically you can never beat “the market” because everything is already baked into the current price of a stock.

Nevertheless, supporters of stock market technical analysis are everywhere, and the tools for their trade can be found throughout bookstores and the Internet. I like to follow some websites that do some of the work automatically and provide a snapshot opinion of whether a particular stock is considered “bullish” (going to go up in price), “bearish” (going to go down in price) or “neutral” (stay about the same price).

For simplicity, I’d like to start by showing you a snapshot of what several stock market technical analysis websites suggest about the exchange traded fund (ETF) with the ticker symbol of SPY. This fund is supposed to go up and down the same as the S&P 500 index does. And many people consider the S&P 500 index (a measure of the price of the 500 largest companies that trade in the U.S.) to be an accurate gauge of where “the market” stands.

For each of the sources below, where I have a choice, I will use a measure that attempts to predict the future direction of SPY or S&P 500 in the next 3 months.

S&P 500 Technical Analysis Summary

Source: Barchart.com   |  BULLISH

Quick ‘n Easy

Barchart.com uses three analyses to predict the direction of SPY over the next three months or so. Looking at the average value and strength of these three signals, we can conclude that BarChart.com thinks that the price of SPY will rise over the next three months.

Easy Notes: BarChart.com says that the price of SPY will probably rise over the next three months. All three signals are at “buy” right now, and none of them are weak signals. Unfortunately, two of three signals are headed in the wrong direction (the right direction would mean “buy” signals are strengthening and “sell” signals are weakening). Overall, this is a bullish assessment.

continue reading…

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Existing Homes Sales and Inventory Months of Supply (thru April 2015)

Most of homes sold are existing homes sales, so it is an important area of the housing sector to follow. I’m continuing a feature called “Easy Trends” – a place where I’ll analyze the recent trend for an indicator and discuss whether it is currently going up, down or neither. You can read the basics of my methodology on the FAQ page.

NOTE: You may be reading an outdated analysis. Please visit my latest existing homes sales and inventory months of supply trend analysis for more info.

Quick ‘n Easy

Typically, if it would take longer than 6 months for the unsold inventory of existing homes (not newly built) to be sold at the latest pace of sales, we can expect prices for existing homes to go down. If it’s less than 6 months, we can expect prices to go up.

You can get a sense for whether there are too many existing homes still on sale (inventory) by taking the total inventory and dividing it by the pace of sales. The result is “months of supply,” which basically means that if existing homes were to continue selling at the same rate as the most recent month of data, the current inventory of homes would be sold by that many months. A normal reading is around 6 months – higher number means too much inventory, and if supply is greater than demand, that usually means prices will drop.

Here’s a chart of the Existing Homes Inventory Months of Supply from Calculated Risk: (focus on the red line)

Existing Homes Months of Supply April 2015 - Calculated Risk

Courtesy: CalculatedRiskBlog.com

Existing Homes Sales Trends and Projections

Below, I will discuss whether the indicator is currently in a trend, when the last confirmed trend was and what that says about projecting the next data point to be released. I typically start my analysis from three years ago. continue reading…

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Initial Weekly Unemployment Claims (4-Week Moving Average) thru Week Ending May 16, 2015 – Easy Trends

In this article, I’ll do an “Easy Trends” analysis of the initial weekly unemployment claims data.  “Easy Trends” is a place where I’ll analyze the recent trend for an indicator and discuss whether it is currently going up, down or neither.  You can read the basics of my methodology on the FAQ page.

NOTE: You may be reading an outdated analysis.  Please visit my latest unemployment claims trend analysis for more info.

Quick ‘n Easy

By tracking the number of people who are filing for unemployment benefits for the first time each week, we get a quick insight into the latest status of the economy’s health.  Fewer claims equals more jobs, which equals more income, which usually equals more consumer spending (70% of the economy!) that supports company profits, which in turn can lead to more hiring.

Quick Version of Easy Trends Analysis

For the Initial Weekly Unemployment Claims series, I will be doing only a brief update as long as the level of claims is super low (below 300,000) or just low (below 350,000) but without a confirmed upward trend (which is undesirable of course). I will only call out a few specific statistics that I like to track. I’ll be tracking the trends, but it takes a lot of time to do the post, so I won’t do a post with the full analysis unless there is any cause for concern. Bottom Line: If you’re seeing my “quick version” of this analysis – don’t be worried about weekly jobless claims!

NOTE: The last time I did a full update was for the week ending March 7, 2015

4-week moving average of weekly initial unemployment claims: 266,250   (Excellent…lowest since April 2000 – we want this number to be below 350,000)

4-week moving average of weekly initial unemployment claims as a percent of the total size of the nation’s workforce: 0.17 percent   (Excellent…All-Time Low!)

Current Trend: Confirmed downward trend of about 5,000 fewer claims per week.   (Excellent)

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Economic Indicators Roundup (May 19, 2015)

Economic indicators are everywhere, so this is kind of like a dashboard that I like to follow.  For each indicator, I will try to give you a brief description, the latest reading and what I understand to be its implications.  For simplicity, I will assign each a rating of positive, neutral or negative.  For the economic indicators, I will denote in each one’s section how I decide which rating to give it.  At the end, I assign an overall rating, but this is just to guide me in my takeaway of where things stand.  It’s not scientifically rigorous or anything.

  • Positive – indicative of a healthy, growing economy.
  • Neutral – indicative of a slow or no growth economy but not a contracting (recession) economy.
  • Negative – indicative of a shrinking economy or recession.

(NOTE: For a “Quick ‘n Easy” read, just review the labeled white boxes, then skip to my “Easy Take” summary at the end.  You can review any charts/graphs afterward.  I want to make sure no one is intimidated by the length of my posts, even though I’m trying to making them easy …)


Quick Summary

Indicator (Click for details – only works if full article is open) Current Rating (change from previous roundup)
GDPNow (GDP Forecast from Atlanta Fed) Neutral
ADS Business Conditions Index Neutral
Bloomberg Financial Conditions Index Positive
Big Four Economic Indicators Neutral   (Upgrade)
Daily Consumer Leading Indicators Negative
Employment Trends Index Positive
Chicago Fed National Activity Index Neutral
Easynomics Real Estate Price Stability Index Positive
 Citigroup Economic Surprise Index Reports generally worse than expectations
Easy Trends Dashboard   (min/max -3 to +3) +1.17 = Somewhat likely moving in a positive direction with readings in varying directions and degrees of confidence

NOTE: You may be reading an outdated analysis.  Please visit my latest economic indicators roundup.



Economic Indicator: GDPNow   |   NEUTRAL
Easy Intro: None yet   |   Link to Source   |   Latest Date This Info Represents: 2nd Quarter 2015 (i.e., three months ending June 2015)

Quick ‘n Easy

The current forecast for real GDP growth in the 2nd quarter of 2015 is 0.7 percent – well below-average growth by historical standards and only barely faster than the 1st quarter. The Federal Reserve Board of Atlanta combines a whole bunch of public data to mimic what the government does when reporting Gross Domestic Product (GDP), which is the broadest and most comprehensive measure of the economy that is widely accepted. It basically measures the value of all goods and services produced in the country, regardless of industry. In a sense, that’s what economics is all about, the value of things. The rate at which GDP is growing tells us whether our economy is strong or not. Historically, the average has been about 3.3 percent per year. It would be great to see at least that rate of growth.

Economic Indicators - GDPNow from Atlanta Fed - May 13 2015

Source: FRBAtlanta.org

Easy Description: GDPNow is a frequently updated estimate of the growth rate of the economy (GDP growth) as opposed to having to wait for quarterly estimates from the Bureau of Economic Analysis for “official” figures.

Latest Readings:

2nd Quarter of 2015: On May 13, GDPNow is positive (+) 0.7 percent annualized growth rate (versus +0.8 percent on May 5)

NOTE: “Annualized growth rate” is how much growth we would see over a full year if economic growth continued at the same pace as it did in the latest quarter being forecast.

Implications: The 1st quarter of 2015 showed virtually no growth (+0.2 percent annualized rate), but many feel it was slowed by several temporary factors that should subside over the course of the following quarters. Unfortunately, the early indications of 2nd quarter growth certainly don’t support that notion.

Easynomics Rating Methodology: For this index, I will use data on the most recent quarter available. If the latest GDPNow estimate refers to a quarter for which there is already an official BEA reading, then I will go with the BEA reading. I will rate anything between zero and (+) 3.3 as “neutral” – anything above or below that will be rated “positive” or “negative” respectively.

continue reading…

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Industrial Production – Easy Trends (thru April 2015)

Let’s talk about industrial production, its importance and the current trends. I’m continuing a feature called “Easy Trends” – a place where I’ll analyze the recent trend for an indicator and discuss whether it is currently going up, down or neither. You can read the basics of my methodology on the FAQ page.

NOTE: You may be reading an outdated analysis. Please visit my latest industrial production trend analysis for more info.

Quick ‘n Easy

Industrial Production (IP) measures how much is being produced by factories, mines and utilities. The changes in IP track very closely with changes in the overall economy.

First, a nice summary of what Industrial Production (IP) is from Econoday:

The index of industrial production shows how much factories, mines and utilities are producing. The manufacturing sector accounts for less than 20 percent of the economy, but most of its cyclical variation. Consequently, this report has a big influence on market behavior. In any given month, one can see whether capital goods or consumer goods are growing more rapidly. Are manufacturers still producing construction supplies and other materials? This detailed report shows which sectors of the economy are growing and which are not.

Easy Translation: The first sentence is probably enough for an understanding – what’s being produced at factories, mines and utilities. The second sentence is a key detail though. Because it relates to manufacturing, and manufacturing is only about 20 percent of our economy, at first glance one might consider this indicator not important. But the changes in the manufacturing sector track the changes in the economy extremely well. In other words, the cycles of the two are well matched, making IP incredibly important to track.

Here’s a ten-year chart of the Industrial Production Index from the Federal Reserve Bank of St. Louis (a level of “100” represents the level in 2007):

Industrial Production Index - April 2015 - FRED

Source: StLouisFed.org

Industrial Production Trends and Projections

Below, I will discuss whether industrial production is currently in a trend, when the last confirmed trend was and what that says about projecting the next data point to be released. I generally start my analysis from 3 years ago. continue reading…

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