Economy Watch: Pending Home Sales Drop in June

By Dees Stribling, Contributing Editor

The National Association of Realtors reported on Thursday that pending home sales dropped in June. The organization’s Pending Home Sales Index slipped to 99.3 from its May reading of 100.7. Down for June 2012, but as the NAR was quick to point out, the index was 90.7 in June 2011. The data reflect contracts inked, but not yet closed.

The NAR posited that inventory shortages in many markets (not trepidation on the part of buyers) pushed pending sales down. The Realtors’ chief economist Lawrence Yun, who always looks for the silver lining, asserted that buyer interest was “strong” but “we’ve been seeing a steady decline in the level of housing inventory, which is most pronounced in the lower price ranges popular with first-time buyers.”

Other factors that seem to be slowing down contract signings include a surge of refinancing activity, which is bogging things down for those trying to get standard mortgage paperwork done. Also (possibly), lenders with stocks of REOs are being more circumspect about putting them on the market, to make sure that all the i’s are dotted and the t’s crossed in their paperwork.

Unemployment claims swing back down

The U.S. Department of Labor reported on Thursday that initial unemployment claims for the week ending July 21, true to the volatile nature of this particular metric, dropped almost as much for this week as they rose the week before. The drop for the week ending July 21 was 35,000, to a weekly total of 353,000, the lowest since March

The less-volatile four-week average was down 8,750 to 367,250. Apparently the swings over the last few weeks are due to the vagaries of the auto industry. Car factories tend to slow down or shut down all together during the summer, owing to weakened demand for autos. But the pattern of closings this summer apparently hasn’t been consistent.

Over the history of tracking initial unemployment claims (back to 1971), the current four-week average is moderately high, but not excessively high. Such levels were previously seen in the aftermath of all the previous recessions, though the levels usually continue to drop to the low 300,000s during periods of expansion. So far, that hasn’t happened during this recovery.

ECB might buy euro-bonds

European Central Bank president Mario Draghi said on Thursday during a speech in London that the ECB is “willing to do whatever it takes to preserve the euro.” That was taken by investors to mean bond-buying, somewhat in the style of the Fed. The comments came at a time when 10-year Spanish debt reached yields of 7.7 percent, a record, and ahead of a policy meeting by the ECB next week.

Wall Street was certainly optimistic about possible action to deal with the euro-crisis on somebody’s part, with the Dow Jones Industrial Average skating upward by 211.88 points, or 1.67 percent. The S&P 500 gained 1.65 percent and the Nasdaq advanced 1.37, despite the drop of Facebook (which met analysts’ expectations, but didn’t please investors anyway).