Implications: The housing market is slowly but surely mending. Although existing home sales fell 2.6% in March, they are still up 5.2% from a year ago. Even with the decline in March, sales averaged 4.57 million homes at an annual rate in the first quarter, the strongest level since the second quarter of 2010. It still remains tough to buy a home. Despite record low mortgage rates, home buyers still face very tight credit conditions. Tight credit conditions would also explain why all-cash transactions accounted for 32 percent of purchases in March versus a traditional share of about 10 percent. Those with cash are able to take advantage of home prices that are extremely low relative to fundamentals (such as rents and replacement costs); for them, it’s a great time to buy. With credit conditions remaining tight, we don’t expect a huge increase in home sales any time soon, but the housing market is on the mend. In other news this morning, new claims for unemployment insurance slipped 2,000 last week to 386,000. Continuing claims for regular state benefits increased 26,000 to 3.30 million. The Philadelphia Fed index, which measures manufacturing activity in that region, declined to +8.5 in April from +12.5 in March. Notably, following the same pattern as the Empire State index, even though the overall index fell – suggesting a moderation of growth after an unusually warm winter – the sub-index for employment picked up substantially, rising to +17.9 in April from +6.8 in March.
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