Vital Signs for the Week of Jan. 19


Among the few reports scheduled for release this week, three will focus on the housing market. The recent developments in housing point to a soft landing this year. While single-family home sales should remain strong historically speaking, the market won't match the blockbuster year of 2003. Indeed, there's some evidence that home sales may have ebbed.

Purchases of new homes have fallen in each of the last three months through November. While sales are still brisk, the number of homes available has also grown during that time. Plus, mortgage applications have also slowed. The four-week moving average is down 7% from the August peak. That has pushed the level of unsold new homes at just over four months, up from the August low of 3.5 months.

At the same time, economists surveyed by Informa Global Markets expect another big month for new home starts. The December forecast is for an annualized increase of 2 million, just shy of the record 2.1 million set in November. Construction of single-family homes is the primary driver. Starts on single-family homes hit consecutive record highs in October and November. But if home sales continue to slow, builders will have to adjust and ratchet down construction plans.

As long as interest rates remain low, any easing should be orderly. However, home builders are nervous that even a small increase in mortgage rates could dampen the market. The National Association of Home Builders sees long-term mortgage rates rising to 6.5% by mid-year. That's still low, but current mortgage rates are under 6%. The belief that rates will gradually rise had respondents to the December National Association of Home Builders' (NAHB) housing market index lowering expectations for home sales over the coming six months.

Financial markets and federal offices will be closed on Monday in observation of the Martin Luther King Jr. Holiday.

Here's the week's economic calendar.

MEETINGS OF NOTE

Monday, Jan. 19

The Democratic Presidential primary season gets under way in earnest with the statewide caucuses in Iowa.

Tuesday, Jan. 20, 12:30 p.m. EST

U.S. Treasury Under Secretary for International Affairs John Taylor and Otaviano Canuto dos Santos Filho, executive director at the World Bank, speak at a forum held by the Brazil?.S. Business Council at the U.S. Chamber or Commerce in Washington, D.C.

Tuesday, Jan. 20, 9:00 p.m. EST

President George W. Bush gives his annual State of the Union speech before Congress in Washington, D.C.

ICSC-UBS STORE SALES

Tuesday, Jan. 20, 7:45 a.m. EST

This weekly tracking of retail sales, assembled by the International Council of Shopping Centers and UBS bank, will update buying activity for the week ended Jan. 17. In the week ended Jan. 10, seasonally adjusted sales fell 0.4%, following a 0.1% slip for the week ended Jan. 3, and 2% jump over the period ended Dec. 27.

INSTINET REDBOOK RESEARCH STORE SALES

Tuesday, Jan. 20, 8:55 a.m. EST

This weekly measure of retail activity will report on sales for the second fiscal week of the month, ended Jan. 17. In the first fiscal week, ended Jan. 10, sales were up 0.3% compared to the first week of December. For the entire fiscal month of December, sales were off by 1% compared to November.

HOME BUILDERS SURVEY

Tuesday, Jan. 20, 1 p.m. EST

The National Association of Home Builders will release its January survey results. The monthly report updates housing-market conditions by measuring builders' assessments of current sales, buyer traffic through model homes, and expected demand. Economists queried by Informa Global Markets expect the overall index to hold at 70 for a third straight month, after hitting a three year high of 72 in October. The index of single-family home sales inched down to 77, from 78 in both October and November. The biggest decline came in home builders' expectations for sales in the next six months, with the index sliding to 76, from 81 in the previous month, and 82 in October.

MEETINGS OF NOTE

Wednesday, Jan. 21, 10 a.m. EST

The House Financial Services subcommittee holds hearings on the Office of Federal Housing Enterprise Oversight's special examination of mortgage lender Freddie Mac.

Wednesday, Jan. 21, 10 a.m. EST

The American Bankers Assn.'s Economic Advisory Committee presents its annual economic and monetary policy predictions from Washington, D.C.

MORTGAGE APPLICATIONS

Wednesday, Jan. 21, 7 a.m. EST

The Mortgage Bankers Assn. releases its tally of mortgage applications for both home buying and refinancing for the week ending Jan. 16. During the period ended Jan. 9, the purchase index managed to climb up to 445.9, from 401.3 in the previous week, and 390.1 for the week ended Dec. 26. The latest reading of the four-week moving average through Jan. 9 improved to 412.2, from 410.1 for the period ended Jan. 2. The average rate on a conventional 30-year mortgage, according to HSH Associates, held steady at 5.98% in the week ended Jan. 9.

The refi index also managed to increase, climbing to 2195.7, from 1755.4 over the week ended Jan. 2, and 1644.3 for the period ended Dec. 26. Even the refi index four-week moving average turned up, hitting 1875.9 for the week ended Jan. 9, from 1845.2 for the prior period.

NEW RESIDENTIAL CONSTRUCTION

Wednesday, Jan. 21, 8:30 a.m. EST

Housing starts probably eased to annual rate of 2 million in December, according to the median forecast of economists surveyed by Informa Global Markets. November housing starts hit a new record of 2.1 million at an annualized rate, after climbing to a pace of 1.98 million in October, from 1.93 in September. Through November, starts in 2003 stand at an average annual rate of 1.83 million, on pace to exceed the 1.7 million level of 2002.

JOBLESS CLAIMS

Thursday, Jan. 22, 8:30 a.m. EST

First-time claims for jobless benefits for the week ended Jan. 17 probably stayed virtually unchanged at 345,000, say economists surveyed by Informa Global Markets. Jobless claims shrank to 343,000 for the period ended Jan. 10, from 353,000 for the week ended Jan. 3. The four-week moving average dropped to 347,500, from 350,500 for the week ended Jan. 3. During the week ended Jan. 3, continuing jobless fell back to 3.14 million, from 3.27 million for the period ended Dec. 27. Continuing claims now stand at the lowest point since August, 2001.

LEADING INDICATORS

Thursday, Jan. 22, 10 a.m. EST

The Conference Board's composite report of leading economic indicators for December very likely improved by 0.3% for a second consecutive period, say economists surveyed by Informa Global Markets. In October, the index rose 0.5%, after holding steady in September. However, the big fall in factory orders and unexpected retreat in the factory workweek could pose a downside risk to the forecast.


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