Unemployment claims for the past week registered 640,000. That's up from last week's 613,000 but that number was skewed by the Easter holiday. The recent peak in late March of 674,000 was the highest in 12 years. Trying to be hopeful but realistic at the same time, it seems like claims are stabilizing. Stabilizing at a high level to be sure, but perhaps indicating better news ahead. The four week moving average was down a bit to 646,000. If the next few weeks were to stay level (or even better, slightly down) then we would have real evidence the worst is over. Stay tuned in to this one. I think it is more critical a read than usual.
Existing home sales were announced at an annual rate of 4.57 million units. That is down 3% from last month which is not the direction we want. But the median sales price was up 4.2% to $175,200. The news we reported yesterday that the Federal Housing Finance Agency saw its home price index rise for the second month in a row supports the number today that there are signs of stabilization in the market.
"Distressed" sales accounted for over half of all sales and new home buyers were 53% of the total. The $8000 tax credit for new home buyers appears to be encouraging sales. You would think with 30 year conforming mortgage rates at about 4.75% and the tax credit there would be more buyers. Perhaps that will surface but the rising unemployment rate weighs heavily on home buying.
Like the sideways movement of unemployment claims noted above, home sales have been stable since January's low of 4.49 million. Both claims and home sales are shakily offering evidence that the recession could be bottoming. Lyle Gramley, Soleil's Economic Strategist, feels the current quarter's GDP will still be down, but significantly better than the first quarter (and the fourth quarter of last year as well.)
The head of the FDIC, Sheila Bair, agrees. At a conference she said we are past the economic crisis stage and are on a path to recovery. "We're in the clean up stage now" said Bair. She added that she is seeing "glimmers of hope" in the California housing market. Go Sheila.
Applications for the third round of the TALF program are being accepted now with a due date of May 5. This program has invested a meager $5.2 billion so far and unless the government makes the rules of engagement clearly and convincing this will not get off the ground. The TALF and the P-PIP could be very effective but not if the Feds threaten the folks that would be their partners.