Factory Expansion Boosts Home Sales

By Lorraine Woellert and Victoria Stilwell  Aug 21, 2014 3:09 PM CT

The economy in the U.S. took a step forward as home sales unexpectedly climbed, manufacturing accelerated and the outlook for the second half of 2014 brightened.

Purchases (ETSLTOTL) of previously owned homes rose in July to a 5.15 million annualized pace, a 10-month high, according to data from the National Association of Realtors in Washington. A factory gauge climbed in August to the loftiest level in more than four years, the index of leading indicators jumped last month and fewer Americans than projected filed claims for jobless benefits last week, other reports showed.

“The economy has got good momentum,” said Michelle Girard, chief U.S. economist at RBS Securities Inc. in Stamford, Connecticut. “The second half of the year is going to look a good deal better than the first half.”

Employment growth, historically low mortgage rates and more properties from which to choose are giving would-be homebuyers the confidence to take the plunge, just as improving business investment is probably behind the pickup in manufacturing. The data come as Federal Reserve Chair Janet Yellen prepares to address central bankers tomorrow on the job-market outlook, which may provide clues on policy makers’ next move.

The drop in jobless claims “is pointing to a labor market that’s gaining traction,” said Millan Mulraine, deputy head of U.S. research and strategy at TD Securities USA LLC in New York. More data like this “will certainly mean that the Fed will be encouraged to move sooner rather than later” to raise interest rates, he said, although “the Fed needs a body of evidence greater than what they have now for them to feel decisive in one direction or the other.”

Fed Minutes

At their July meeting, Fed officials raised the possibility they’ll increase the target interest rate sooner than anticipated in light of labor-market strength, according to meeting minutes released yesterday. Weak wage growth and low inflation have given the Fed room to hold the target rate near zero, which has kept mortgage rates low.

Stocks rose, sending the Standard & Poor’s 500 Index to an all-time high, as data boosted optimism in the economy amid speculation the Fed will continue to support the recovery. The S&P 500 climbed 0.3 percent to 1,992.38 at the close in New York.

By the Tracy Tidwell Team at ERA Team Real Estate in Conway, AR
http://www.tracytidwell.com
Tracy: 501-472-4709   ERA: 501-327-6731