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e-Edge Newsletter v.19 n. 49 – Released December 1, 2015

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v.19 n. 49 – Released December 1, 2015

This Week’s Headlines:

SoCal Home Sales and Median Prices in October

Southern California home sales increased slightly over the year in October, edging up by 1.3% to 19,930 units (new and resale houses and condominiums). Although sales have now risen on year-over-year basis for nine months in a row, the October advance was the second smallest over that period coming in just ahead of February’s gain of 0.5%. After a comparatively strong summer, sales dipped more than usual from September to October, falling by 5.5% over the month.

The median price across Southern California increased by 5.6% over the year to October to $435,000 but was flat over the month. The median prices has now risen for 43 consecutive months on a year-over–year basis but remains 13.9% below the peak price reached in mid-2007. The share of sales for homes priced above $500,000 was 39.8% in October, up from 36.4% a year ago. The number of homes sold for $500,000 or more increased by 10.8% over the year, while sales for less than $500,000 were up by just 0.8%.

Sales remained constrained by the lack of inventory and declining affordability. More buyers of low- to mid-prices homes are turning to low down payment FHA loans for which the mortgage premium insurance was lowered this year. The increased use of these loans is contributing to the limited supply of homes in more affordable markets. These same markets have also experienced some of the sharpest increases in median prices. Meanwhile, although investor purchases have been trending lower, they are still above normal and tend to be in lower-priced areas, adding to demand. On the supply side, new home construction is still below historical levels and what is being built has been in the mid- to high-price range. This is understandable given high development costs, but it further exacerbates supply and affordability issues. (Kimberly Ritter-Martinez)


Source: CoreLogic

Personal Income Growth Strengthens

Although holiday retail sales have gotten off to a slow start, the uptick in personal income in October may be a sign of better things to come for the nation’s retailers. Total personal income in the U.S. increased in October by 0.4% on a nominal basis. Wages and salaries, the largest component of personal income, rose by a robust 0.6%.

Real disposable income (adjusted for taxes and inflation) also increased by 0.4%. Real personal consumption expenditures, on the other hand, were up by a tepid 0.1%. Accordingly, the personal saving rate rose from 5.3% in September to 5.6% in October. Real spending on durable goods was up by 0.2% over the month, while spending on nondurable goods edged up by 0.1%. Spending on services, which comprise 65% of consumer spending, was flat.

On a year-to-year basis, incomes and spending moved higher in October:

  • Real disposable income growth rose by 3.9% in October, the same rate as September.
  • Real personal consumption expenditures grew by 2.7%.
  • Growth in real spending on goods (3.7%) outpaced spending on services (2.2%) although in dollar terms, Americans spend more than two times as much on services as they do goods.

Consumer prices ticked up by 0.1% in October and were up over the year by 0.2%. Excluding food and energy, prices advanced by 1.3%.

Personal income growth in October taken together with weaker than expected spending implies consumers were in a good position ahead of the holidays. The next two months will tell if higher incomes translate to an increase consumer spending and a happy holiday season for the nation’s retailers. (Kimberly Ritter-Martinez)

Source: U.S. Bureau of Economic Analysis

Events of Interest

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