Housing Market Continues to Stumble

May 27, 2008--The housing market continued to stumble, with existing homes sales falling in April. The prices paid by producers continued to increase in April, as the Producer's Price Index also rose. The Conference Board's Leading Indicators provided some good news, as it rose for the second straight month.

 

Existing Home Sales
According to the National Association of Realtors, existing home sales fell 1.0% in April. Sales of both single-family homes and condos fell. Furthermore, the median existing-home price is off 8.0% compared to a year ago. In a spot of encouraging news, the rate of decline in sales seems to be slowing. A weak housing market is expected the year, as continued concerns over credit quality and unstable financial markets will keep standards for mortgage underwriting high, thus keeping demand low.

 

Producer Price Index
Producer prices for finished goods increased 0.2% in April, after rising 1.1% in March. Increased vehicle and furniture prices contributed to the month's increase. Notable, increases in energy and food prices paused during the month. Moreover, core prices, which exclude food and energy prices, increased 0.4% for the month. If demand remains stable during the coming months, topline inflation will likely remain stable, thus giving monetary policy makers some leeway to stimulate growth.

 

Conference Board's Leading Indicators
The Conference Board's Index of Leading Indicators rose 0.1% in April, matching a 0.1% increase in April. Six of the ten components made positive contributions to the index, led by higher stock prices. However, three of the ten components made negative contributions, with weakened consumer confidence and continued declines in manufacturing posting the largest declines. April's reading is the first time in a year and a half that the index offered two consecutive gains.