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Report from
North America
Existing home sales rise 3% but high mortgage
rates
remain a concern
Sales of previously owned homes rose 3.1% in January to
4 million units on a seasonally adjusted annualized basis
according to the National Association of Realtors (NAR).
Sales were down 1.7% year on year.
“While home sales remain lower than a couple of years
ago, January’s monthly gain is the start of more demand,”
said Lawrence Yun, Chief Economist for the NAR.
“Listings were modestly higher and home buyers are
taking advantage of lower mortgage rates compared to late
last year.”
The data is based on closings so the contracts were likely
signed in November and December when mortgage
interest rates dropped below their October high of 8%. By
mid-December rates had hit a low of around 6.6%. Today
they are back over 7%, according to Mortgage News
Daily.
The inventory of homes for sale in January increased to
1.01 million units, up 3.1% from January 2023, but still at
a 3-monthlow.
At 480,000 units, existing-home sales in the Northeast
were unchanged from December but down 5.9% from
January 2023. In the Midwest, existing-home sales
increased 2.2% from one month ago to an annual rate of
950,000 in January, down 3.1% from last year.
Existing-home sales in the South rose 4.0% from
December to an annual rate of 1.84 million in January, a
decline of 1.6% from the previous year. In the West,
existing-home sales elevated 4.3% from a month ago to an
annual rate of 730,000 in January and grew 2.8% from one
year earlier.
See:
https://www.nar.realtor/research-and-statistics/housing-statistics/existing-home-sales
Housing starts post sharpest drop since 2020
Construction of new US homes fell 14.8% in January on a
sharp decline in multi-family construction while single-
family production showed signs of improvement.
Housing starts fell to a 1.33 million annual pace from 1.56
million in December, the lowest level since August 2023.
The drop in January was the sharpest since April 2020,
during the coronavirus pandemic, when starts fell by
nearly 27%. Not including that pandemic drop, housing
starts fell by the most since 2015.
The only region where builders increased construction was
the Northeast, where single-family starts rose 26.7%.
Every other region posted a drop in January. While
builders scaled back construction of new single-family
homes by 4.7% in January, multi-family construction took
a much sharper dive as construction of apartments fell
35.8%.
“We suspect the multi-family sector will continue to be a
drag on new development this year, given the huge
number of multi-family units already under construction,”
Thomas Ryan, property economist at Capital Economics,
said. Building permits, a sign of future construction, fell
9% for apartments in January, while permits for single-
family homes rose 1.6%.
In a recent survey of builders in January, builders were
upbeat about future sales of new homes and optimistic
about demand, as they expect interest rates to fall through
the rest of the year.
New home construction in Canada fell by 10% in January
compared to December, as fewer multi-unit urban homes,
such as townhouses, were built, according to the country's
national housing agency. The Canada Mortgage and
Housing Corporation reported that housing starts came in
at 223,589 units in January, down 25,379 from December.
Many economists had predicted there would be an
increase.
See:
https://www.census.gov/construction/nrc/current/index.html
Builder confidence continues to climb
Home-builder confidence rose in February, with the
industry expecting the Federal Reserve to cut interest rates
later this year, which could boost demand for homes.
Expectations about a potential rate cut and a drop in
mortgage rates in the coming months pushed the National
Association of Home Builders’ monthly confidence index
up four points to 48 in February, the trade group reported.
The index is up for the third month in a row and is at its
highest level since August 2023.
See:
https://www.census.gov/construction/nrc/current/index.html
Economy continues to surprise
The US economy remained shockingly robust in the fourth
quarter to close out a remarkably strong 2023 as
consumers and businesses continued to spend, crushing
expectations of a recession.
Gross domestic product, the broadest measure of
economic output, rose at a seasonally and inflation-
adjusted annualized rate of 3.3% from October through
December, the US Department of Commerce reported.
That was slower than the blistering 4.9% rate from July
through September, when American consumers binged on
services and goods. Growth in 2023 overall, from January
through December of last year, registered at a robust 2.5%
rate.
The economy’s strength in the final months of 2023 was
broad based—driven by consumer spending, business
investment, government outlays, exports, and
improvements in housing conditions.
Consumer spending, which accounts for about two-thirds
of the US economy, grew at a healthy 2.8% rate in the
fourth quarter, a slightly softer pace than the 3.1% rate in
the prior three-month period. Meanwhile, business
spending accelerated to a 1.9% rate, up from 1.4%.
“Prospects are good that the economy will continue to
perform well this year,” Scott Hoyt, senior director at
Moody’s Analytics, said in a release. “Consumers are
doing their part and spending just enough to support
broader economic growth.”
In related news, the US economy added 353,000 jobs last
month, according to Bureau of Labor Statistics data. The
reported strength of the job market once again surprised
economists as the number was nearly twice what was
expected. The unemployment rate was 3.7% for the third
month in a row. The unemployment rate has now stayed
safely below 4% for two full years. The last time the
unemployment rate was this low for this long was in 1967.
Employment showed little change over the month in
construction, while employment in manufacturing edged
up in January, adding 23,000 jobs. Manufacturing
experienced little net job growth in 2023.
See:https://www.bea.gov/news/2024/gross-domestic-product-fourth-quarter-and-year-2023-advance-estimate
and
https://www.bls.gov/news.release/empsit.nr0.htm
Consumers more assured about the economy
US consumer sentiment was essentially unchanged from
January, as the University of Michigan index rose 0.6
index points this month and solidified the large gains from
the past two months.
“The fact that sentiment lost no ground this month
suggests that consumers continue to feel more assured
about the economy, confirming the considerable
improvements in December and January across various
aspects of the economy,” said Surveys of Consumers
Director Joanne Hsu. “Consumers continued to express
confidence that the slowdown in inflation and strength in
labor markets would continue.”
Five-year expectations for business conditions rose 5% to
their highest reading since December 2020. Sentiment is
currently about 30% above November 2023 and about 6%
below its historical average since monthly data collection
began in 1978.
See:
http://www.sca.isr.umich.edu/
and
https://www.barrons.com/livecoverage/stock-market-today-021624/card/consumer-sentiment-stalls-in-february-5aQetuSsEH1mB1ifbEPg
Manufacturing sector appears past the worst of
downturn
Economic activity in the manufacturing sector contracted
in January for the 15th consecutive month say the nation's
supply executives in the latest Manufacturing ISM Report
On Business.
The closely watched index that measures US
manufacturing activity rose to 49.1% in January from
47.1% in the prior month. That is the highest level since
October. Any number below 50% reflects a shrinking
economy.
Timothy Fiore, chair of the ISM’s manufacturing-survey
committee, said that the January data show “the beginning
of a next growth cycle — but it’s early.” He said the
improvement came after the Federal Reserve signaled it
expected to cut rates in 2024, which helped improve
investment spending.
Both the Wood Products industry and the Furniture and
Related Products industry reported contraction in January.
In short, the manufacturing sector appears to be past the
worst, but we see few signs of a raging rebound looming
in the data; a gradual further uptrend in activity is a more
reasonable bet,” said Ian Shepherdson, chief economist at
Pantheon Macroeconomics.
See:https://www.ismworld.org/supply-management-news-and-reports/reports/ism-report-on-business/pmi/october/
Decline in remodeling and construction forecasted for
2024
Although remodeling is still high on many US
homeowners’ lists the National Kitchen & Bath
Association’s (NKBA) forecastss a 2% year-over-year
decline in 2024.
“Although their appetite to remodel is strong, many of
these households are deferring large projects or breaking
them into smaller phases because of a decline in excess
household savings, which have been eroded by inflation
over the past 18 months; higher financing rates that make
it less desirable to tap into home equity; and continued
overall uncertainty about the economy,” said Bill Darcy,
NKBA’s global president and CEO.
Although new construction spending was up in the fourth
quarter of 2023, it will take a backseat in 2024 because of
high interest rates. It will resonate more with homeowners
who own more than one residence, but first-time buyers
are still going to struggle. According to the NKBA, new
construction spending is forecasted to decline by 4% in
2024 to US$106 billion.
“For many owners, current mortgage rates are higher than
their existing rate,” said Robert Dietz, senior vice
president and chief economist of the National Association
of Home Builders. “There will be a small gain in 2025 as
interest rates decrease and as the volume of existing home
sales picks up speed.”
See:
https://www.kbbonline.com/news/business/2024-kb-remodeling-and-construction-outlook/
Florida couple sentenced for illegally importing
Chinese plywood
A husband and wife in Florida, Noel and Kelsy Hernandez
Quintana were both sentenced to 57 months in prison for
illegally importing and selling between US$25 million
andUS $65 million worth of plywood products in violation
of the Lacey Act and Customs laws. Their employee,
Marta Angelbello, was also sentenced.
According to court filings the Quintanas and Angelbello
together engaged in a sophisticated scheme to evade
antidumping and countervailing duties owed on hardwood
plywood products made in China by falsely declaring the
species, country of origin or country of harvest of the
wood from which the plywood was made.
At times they caused containers of plywood to be shipped
from China to Malaysia or Sri Lanka, for example, where
the wood was taken out of the original containers and put
into a second set of containers to conceal the Chinese
origin of the product.
The Quintanas incorporated seven companies in the
United States, naming relatives or friends as corporate
officers and agents and used these shell companies to
import hundreds of shipments of plywood products into
the US between February 2016 and December 2020.
The Quintanas also incorporated a financial shell company
through which they accepted payments from purchasers
for the plywood they imported in violation of law.
“In this case, the defendants undermined US policy by
evading legally mandated customs duties on plywood
manufactured in China using Russian timber,” said
Markenzy Lapointe, US Attorney for the Southern District
of Florida. “This case shows the importance of prosecuting
Customs and environmental offenses.”
In addition to their prison sentences, the Quintanas were
ordered to pay more than US$42 million in forfeitures and
more than US$1,6 million in storage costs.
See:https://www.msn.com/en-us/news/crime/florida-couple-sentenced-for-illegally-importing-plywood-from-china-must-pay-42-million/ar-BB1ixcSV
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