Housing market feeds off positive economic reports
Layoffs decline, GDP increases
Several economic reports painted a positive picture for the American housing market, with job layoffs on the decline and overall economic growth edging a bit higher.
"This is generally positive news for housing demand. As more people go back to work, it means more people have income and the financial resources that they need to create households and buy homes," said Frank Nothaft, vice president and chief economist for Freddie Mac.
The latest unemployment report from the U.S. Department of Labor noted that initial jobless claims dropped by 23,000 filings to 298,000 for the week ended Nov. 30.
"This is the lowest level since September and the second lowest level of the recovery. In a reversal of prior special factors tied to the government shutdown and counting problems in California, initial claims have now fallen in 7 of the last 8 weeks with the 4-week average down for 5 weeks in a row and now at 322,250 for the lowest level since September," analysts with Econoday said.
On the other side, Challenger, Gray & Christmas also released its jobs report Thursday, showing U.S.-based employers announcing plans to shed 45,314 workers from their payrolls in November. This is only a 0.9% decline from the 45,730 planned job cuts recorded in October.
The GDP also experienced relative growth and increased at an annual rate of 3.6% in the third quarter of 2013, compared to the 2.8% advance estimate and 2.5% in the second quarter, the U.S. Department of Commerce said.
"Headline growth appears even more impressive, pushing above three percent for the first time since Q1 2012; however, the underlying story does not change," said Lindsey Piegza, Sterne Agee chief economist. "Headline growth was led by a surge in inventories - larger than previously reported - while consumption continued to wane and business remained sidelined. The surge in inventories accounted for 1.68%, or nearly half of headline growth in the third quarter."
But the flow of positive housing reports brings up the possibility of the Fed tapering its monthly purchases of mortgage-backed securities and Treasurys.
"At some point the Federal Reserve does have to cease buying bonds," Nothaft said. However, he does not believe the Fed will start tapering until perhaps the March policy meeting.
There is still a fair amount of weakness in the labor market that the Fed has to consider, in addition to Congress going over the federal budget once again, Nothaft explained.
But not all analysts are convinced that tapering will wait till early next year.
According to analytic firms Trepp, “It was an uneven day for the financial markets on Wednesday, as investors fretted that the recent uptick in economic data could hasten the Fed's decision to reduce the rate of its monthly bond purchases."